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Author: 


Twyford,  Harry  Beaumont 


Title: 


Purchasing  and  storing 


Place: 


New  York 


Date: 


[1921] 


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COLUMBIA  UNIVERSITY  LIBRARIES 
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Twyford,  Harry  Beaumont,  1872- 

Purchasing  and  storing,  by  H.B.  Twyford 
•••  N.Y.,  Industrial  extension  institute 
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('4 


FACTORY  MANAGEMENT 
COURSE  AND  SERVICE 


A  Series  of  Interlocking  Text  Books  Written  for  the 
Industrial  Extension  Institute  by  Factory  Man- 
agers and  Consulting  Engineers  as  Part 
of  the  Factory  Management 
Course  and  Service 


INDUSTRIAL    EXTENSION    INSTITUTE 

INCORPORATED 

NEW  YORK 


ADVISORY  COUNCIL 

Nicholas  Thiel  Ficker,  Pres.,   Charles  P.  Steinmetz, 

^  -r^     T^  m  CMef    Consulting    Engineer t 

Charles  E.  Funk,  Secy.,  General  Electric  Co, 

Chas.  a.  Brockaway,  Treas., 

Alwin  von  Aitw, 

Gen.  Mgr.  Boorum-Pease  Co, 

Charles  C.  Goodrich, 

Goodrich-Lockhart   Co. 

Willard  F.  Hine, 

Consulting  Appraisal  Engi- 
neer, Chief  Gas  Engr., 
Public  Service  Comm. 
N.  Y. 


Jkrvis  R.  Harbeck, 

Vice-Pres.  American  Can  CO. 

Benj.  a.  Franklin, 

Vice-Prea.  Strathmore  Paper 
Co.,  Lieut.  Col.  Ord- 
nance Depi. 

Charles  B.  Going, 

Formerly  Editor,  The  Engi^ 
neering  Mngasine,  Con- 
sulting Industrial  Engi^ 
neer. 


STAFF. 


C.  E.  Knoeppel, 

Pres.    C.   E.   Knoeppel   &   Co., 
Consulting   Engineers. 

Meyer  Bloomfield, 

Consultant  on  Personnel. 

George  S.  Armstrong, 

Consulting    Inaustrial   Engineer. 

H.  B.  Twyford, 

Purchasing  Agent,  Nichols  Cop- 
per Co. 

Nicholas  Thiel  Fickeb, 

Consulting   Industrial   Engineer. 

DWIGHT  T.  Farnham, 

Consulting   Industrial  Engineer. 

WiLiARD  L.  Case, 

Pres.  Willard  L.  Case  &  Co., 
Consulting  Engineers. 

David  Moffat  Myers, 

Griggs   &   Myers,   Consulting 
Engineers. 

Joseph  W.  Roe, 

Prof.   Machine  Design,   Sheffield 
Scientifio  School,  Yale  Univ. 

Albert  A.  Dowd, 

Consuting  Engineer. 

William  F.  Hunt, 

Consulting   Inaustrial   Engineer. 

Charles  W.  McKay, 

Appraisal  Engineer,  Cooley  & 
Marvin. 


Organization    and   Administba- 
tion. 

Labor  and  Compensation. 

PiiANNINa  AND  TiMI^-STUDY. 

pltrchasing  and  storing. 

Industrial  Cost  Finding, 
Executive  Statisth^al  Control 
The  Factory  Bun -ding. 

The  Power  Plant. 

The  Mechanical  Equipment. 

Tools  and  Patterns. 
Handling  Material  in  Factob- 

lES, 

Valuing  Industrial  PsopEBTiEa, 


PURCHASING  AND  STORING 


BY 


H.   B.   TWYFORD 

Purchasing  Department  of  the  Otis  ELemitor 

Company 


VOLUME  4 
FACTORY  MANAGEMENT  COURSE 


INDUSTRIAL   EXTENSION   INSTITUTE 

INCORPORATED 

NEW   YORK 


' 


?:/\  S  \3 


Copyright,  1921,   by 
INDUSTRIAL  p]XTENSION  INSTITUTK 

INCOBPOBATED 


di 


>UUUyv\X/©o 


J) 


:l5i 


>  PREFACE 

The  provision  of  raw  materials  and  supplies  for  a  manu- 
facturing establishment  is  a  never-ending  process  as  long  as 
the  factory  is  in  active  operation.  It  must  commence  before 
the  machinery  is  set  in  motion  and  the  workman  exercises  his 
art  in  producing  the  output.  Prior  to  this  the  purchasing 
and  storing  cycle  of  operations  will  have  been  accomplished 
for  the  particular  article  on  which  the  workman  is  engaged. 
Just  as  surely  as  a  machine  or  tool  must  travel  at  a  given 
speed  to  attain  the  maximum  efficiency,  so  surely  must  pur- 
chasing and  storing  proceed  in  feeding  raw  materials  and 
supplies  to  the  establishment.  Only  on  such  a  basis  can  max- 
imum efficiency  be  secured. 

There  is  no  natural  element  which  is  not  undergoing  a 
change.  Nature  is  continually  at  work  producing  raw  mate- 
rials for  manipulation  by  human  effort.  If  human  effort 
could  parallel  this  endless  activity  there  would  be  no  reason 
for  studying  the  economic  questions  raised  by  the  delays  in 
transporting,  storing,  and  handling  the  product  which  is  to 
undergo  change  in  the  factory. 

Some  of  the  most  important  problems  in  purchasing  and 
storing  are  caused  by  these  delays,  or  rather  by  the  quiescent 
periods  during  which  the  raw  material  is  undergoing  no 
change ;  for  it  is  during  these  periods  that  economic  factors 
ar^  adding  to  the  cost,  to  such  an  extent,  perhaps,  as  to  sweep 
aside  considerations  regarding  the  actual  price  at  which  mate- 
rial can  be  bought. 


vi 


PREFACE 


Having  a  manufacturing  establishment  ready  for  operation, 
it  is  with  raw  material  that  real  efficiency  must  begin.  It  is 
the  purchasing  and  storekeeping  departments  which  must 
logically  take  the  first  step  to  effect  savings  in  production. 
This  does  not  mean  that  the  purchasing  agent  must  spend 
his  energy  in  beating  down  prices,  and  the  storekeeper  spend 
his  time  in  accumulating  a  large  stock.  The  problems  go 
deeper  than  that.  Raw  material  must  be  obtained  and  sup- 
plied to  the  production  department  at  the  lowest  price  for 
the  right  material  to  obtain  the  maximum  output  of  finished 
parts,  and  this  must  be  done  with  a  minimum  waste  of  effort, 
and  a  minimum  waste  of  time  while  the  material  is  at  rest. 

Good  buying  and  storing  are  fundamental  principles  of 
manufacturing  efficiency.  The  problems  connected  with  the 
execution  of  these  functions  are  many,  varied,  and  interest- 
ing. I  have  attempted  in  the  following  pages  to  outline  the 
most  approved  and  tried  methods  of  solving  these  problems, 
laying  the  greatest  stress,  perhaps,  on  the  acquisition  of  pur- 
chasing knowledge. 

I  desire  here  to  express  my  appreciation  of  the  courtesy 
shown  by  various  manufacturers  in  allowing  me  to  exhibit 
their  purchasing  forms  and  requisitions. 

H.  B.  TWYFORD. 


TABLE    OF    CONTENTS. 


CHAPTER  I 

PRELIMINARY  OUTLINE  OF  PURCHASING 

PAGE 

Definition 1 

Science  of  Purchasing 2 

Economics  of  Purchasing 2 

Methods 3 

The  Purchasing  Department 4 

Creative  Work 6 

Policy 7 

Six  Great  Divisions 8 

Correlation  of  the  Divisions 11 

CHAPTER  II 

THE  ARTICLE 

Specifications  and  Definitions 14 

Material  Specifications 15 

Equipment  Specincations 17 

Coal  Specifications 18 

Standard  Commercial  Definitions 22 

Examples  of  Improper  Descriptions 24 

Purposes  of  Definitions 28 

Standardizing  Definitions  through  Purchasing     ...  33 

Enforcing  Standard  Definitions 35 

Intended  Use  of  Articles 38 

Quantity  Purchased 41 

vii 


viii  TABLE  OF  CONTENTS 

CHAPTER  III 

THE  SELLER 

PAGE 

Relations  Between  Buyer  and  Seller 43 

Selling  Expense  and  the  Buyer 45 

Reducing  Selling  Costs 47 

Segregating  Sellers 48 

Genuine  Competition 49 

Losses  through  Incorrect  Definitions    ......  50 

Departmental  Losses 51 

The  Market 52 

Creating  Markets 53 

Over-Systematization 55 

Jobbers 56 

Sources  of  Supply 57 

Records  of  Sources ♦     •  58 

Purpose  of  Records 61 

Recapitulation ^^ 

CHAPTER  IV 

THE  PRK  E 

Price  versus  Value "4 

Price  Knowledge "° 

Daily  Quotations *^ 

Price  and  Demand ^^ 

Trade  Cycles  and  Prices '^^ 

Exports  and  Prices 74 

Price  Authority ''^ 

Manipulated  Prices "" 

Competitive  Prices 77 

Strategy  in  Arranging  Prices •  ^ 

Buying  Methods   . ^^ 

Examples  of  Buying  Methods ^2 

Resale  Prices "4 

Price  Based  on  Performance ^5 


TABLE  OF  CONTENTS 


Price  Gruaranties  . 
Price  Maintenance 
Other  Arrangements 


CHAPTER  V 

THE  CONTRACT 

Care^  in  Making  the  Agreement 

Verbal  Orders       •..>... 

Written  Contracts 

Preliminary  Communications    .,..., 
Distinction  Between  Offer  to  Sell  and  Tentative  Bid 

Changes  in  Contracts 

What  the  Contract  Should  Include 
Definition  of  Quality  or  Grade 

Time  of  Delivery ^ 

Place  of  Delivery 

Terms  and  Time  of  Payment 

Cash  Discounts 

Contracts  and  Orders 

Contract  Forms 

Regular  Orders 

Rush  Orders    ... 

Pick-Up  Orders 

Covering ' '  Orders  for  Recording  Purposes  .'      .'      * 

Remedial  Contract  Forms 



CHAPTER  VI 

DELIVERY 
Importance  of  a  Definite  Delivery  Date 
Co-operation  Between  Purchasing  and  Production  De- 

partments 

Delivery  and  Production  Costs      .'     .* 

Buying  on  Schedule .*      '      '      *      ' 

Transfer  of  Ownership    .      .     ] 


PAGE 

86 
87 
88 


90 
91 
91 
92 
92 
93 
94 
95 
96 
96 
98 
100 
103 
104 
107 
109 
111 
113 
113 


117 

118 
119 

120 
121 


M 


a? 


TABLE  OF  CONTENTS 


FAGE 

.     .     122 

Traffic  Work .123 

Follow-up  Work    . .126 

Emergency  Orders           '•''''''     12I 
Helps  in  Getting  Deliveries  . 


Inspection 

Inspection  Before  Shipment       .      •      • 

Testing  Samples ^  "  •   * 

Need  of  Recognized  Methods  of  Testing 
Transportation  Problems     .      .      •      • 


128 
129 
129 
131 


CHAPTER  VII 

INVOICES 
Completion  of  the  Purchasing  Cycle    .... 

Work  to  be  Done  on  Invoices 

Standardizing  Invoices 

Relation  of  Invoices  to  Purchasing      .... 

Trade  Acceptances '      '      ' 

Arranging  Dates  for  Payment  of  Invoices     .      . 
Avoiding  Duplicate  Payment  of  Invoices  .      .      . 

Credits 

Meaning  of  Net  Cash 

Freight  Charges * 

Invoices  Without  Previous  Price  Arrangement    . 

The  Buyer's  Obligation •      ' 

Invoices  and  Cash  Discounts 


134 

135 

136 

137 

137 

140 

141 

143 

145 

145 

147 

149 

154 


CHAPTER  VIII 

THE  PURCHASING  AGENT 


Responsibility        .      • 
Qualifications  . 
Breadth  and  Vision    : 
Finance  and  the  Buyer 
Management  and  Administration 


157 

158 
160 
162 
163 


TABLE  OF  CONTENTS 


Psychology  in  Purchasing 
Reducing  the  Cost  of  Salesmanship 
Technical  Information 
Policy 

Authority  .... 

Natural  Aptitude 

Wider  Field  for  the  Purchasing  Agent 


Department 


CHAPTER  IX 

THE  PURCHASING  DEPARTMENT 
Origin  and  Mission 
Standardizing  Supplies  . 
Relations  with  Other  Departments 
Departmental  Meetings 
Compiling  Records     .      .      .     '. 
Relations  with  Sellers 
Cost  of  Issuing  Orders 
Practical  Experience  for  Employees 
Ethical  Standards  and  Policy  of  the 
Reciprocal  Agreements  in  Purchasing 
Executive  Pressure 
Friendship  in  Business  . 
Effects  on  Whole  Department 
Outline  of  Work 
Organization    ....      * 
The  Purhcasing  Agent    . 
Assistant  Purchasing  Agent,  or'ch'ief 
Requisition  Clerk 
Price  Clerk      . 
Order  Clerk     . 
FoUow-Up  Clerk 
Traffic  Clerk    . 
Invoice  Clerk 


Clerk 


xt 

PAGE 
164 

165 
166 
167 
168 
169 
171 


173 

174 

175 

176 

177 

178 

180 

181 

182 

183 

184 

185 

187 

189 

190 

191 

193 

194 

194 

194 

195 

195 

195 


\ 


xii  TABLE  OF  CONTENTS 

PAGE 

Information  Clerk 196 

General  Arrangement  of  Department 196 

CHAPTKR  i. 

THE  PURCHASING  LIBRARY 

Books ^^^ 

Periodicals 200 

Registers  and  Agencies '^^1 

Catalogues 202 

Technical  Information  in  Catalogues 204 

Standardization  of  Catalogues 206 

Procuring  Catalogues 208 

Filing  Catalogues 209 

Universal  Standard  Catalogue  System 210 

The  Universal  System  and  Standardization     ....  212 

CHAPTER  XI 

THE  USE  OF  CHARTS  AND  DIAGRAMS  IN 

PURCHASING 

Figures  and  Charts 214 

Value  of  Charts  to  the  Buyer 216 

Compound  Information 220 

Influence  of  Charts  on  Buying 223 

Scheduling  Requisitions  by  Charts •      •  223 

Augmenting  Buyer's  Knowledge  of  Business  Conditions  224 

CHAPTER  XII 

ROUTINE  WORK  OF  THE  PURCHASING 

DEPARTMENT 

Disposition  of  Incoming  Documents .226 

Accumulating  and  Recording  Information      ....  227 

The  Requisition 233 

''Rush"   Requisitions ^^^ 


\ 


TABLE  OF  CONTENTS 


Xlll 


PAGE 

y      •     •     •     . 

.      .     236 

.      .     237 

'               •               • 

.     .     238 

•               •               « 

.     .     243 

•               •               fl 

.     244 

CHAPTER  XIII 

Fundamentals  Necessary 
Additional  Information 
Samples  of  Requisitions 
Routing  the  Requisition 
Pricing  Requisitions  . 


ADDITIONAL  ROUTINE  WORK  OF  THE 

PURCHASING  DEPARTMENT 

Contracts 

Orders 

Acknowledgment  of  Orders 

Writing  Up  Orders 

Variations  in  Routine  Work 

Purchase  Order  Record 

Delivery  Problems 

Following  up   Orders     .... 


251 
256 
257 
259 
264 
264 
267 
267 


\ 


CHAPTER  XIV 

FINAL  ROUTINE  WORK  OF  THE  PURCHASING 

DEPARTMENT 

Invoices 

Methods  of  Recording 

Preliminary  Work 

Checking  Invoice  With  Order    .....*].'' 
Cheeking  Invoice  With  Material  Received       .      .'     .*     ,*     ^ot 

Checking  Prices .'288 

Classifying  and  Checking  Extensions  .....*.'     289 

Checking  Freight  Charges .'     .'     !     289 

Final  Approval .'     .'     291 

Securing  Cash  Discounts .'.'].*     291 

Securing  Credits !     .'     .'     '    292 


278 
280 
282 
283 
284 


^i^  TABLE  OF  CONTENTS 

CHAPTER  XV 

PURCHASING  PROBLEMS  AND  THEIR 
SETTLEMENT 

PAGE 

297 
How  Problems  Arise ^gg 

Patterns  and  Dies ^99 

Purchasing  Agent's  Authority ^^^ 

Responsibility  of  Salesmen 300 

Orders  to  Agents ^^^ 

Price  Lists ^qq 

Refusing  to  Sell ^^^ 

Quality 3qj^ 

Return  of  Containers 

Leeway  in  Manufacturing  Quantities ^^^^ 

Solvency  of  Vendors •      •  ^^^^^ 

Machine  on  Trial ^^2 

Trial  Period *.     '      *  *^n9 

Damages  to  an  Article  being  Demonstrated     '      *      '      '     3J3 

Cancellation  of  Contract ^^^ 

Contracts  not  Specifying  Quantity ^^^ 

Orders  without  Prices ^^ 

Penalty  Clause     -     *     '     '     '     \ ao4 

Accepting  a  Portion  of  Goods  Offered JJJ 

False  Statements  in  Negotiations ^^^ 

Offers  by  Telegraph ^^^ 

Carbon  Copies 305 

Mistake  in  Contract ] 

Crating  and  Packing  Charges ]^^^ 

Shipping  an  Order  in  Part ' 

Delivery  Prior  to  Contract  Time 

Delivery  Point  not  Specified 

Delivery  and  Conditions  beyond  Control ^^^ 

Delivered  at  Destination 

Prompt  Shipment 


TABLE  OF  CONTENTS 


XV 


PAGE 

Transportation     Company's     Obligation     to     Deliver 
Promptly gQg 

Transportation  Losses 308 

Claim  against  Transportation  Company 309 

Credit  for  Returned  Goods 309 

Freight  on  Defective  Material 309 

Liability  of  Railroad  Company 309 

Receipt  for  Goods 310 

Inspecting  Material 3J0 

Terms  Printed  on  Order  Forms 310 

Terms  of  Payment 311 

Cash  Discounts ^^^ 

No  Extra  Dating !      .      .  311 

Cash  Discounts  and  Freight  Allowances 311 

Terms  on  Invoices 311 

Lost  Invoices g^o 

Settlement  of  Debit  by  Part  Payment 312 

Time  of  Payment 3^2 

Credit  Period 312 

Payments 3^3 

Date  of  Invoices 323 

CHAPTER  XVI 

RAW  MATERIAL  AND  SUPPLIES 

A  Form  of  Wealth 314 

Cost  of  Storage ]     .'      !  315 

Factors  which  Reduce  Values 317 

The  Great  Stores  Problem 313 

Profits  in  Storage 320 

Safe  and  Sane  Storekeeping 321 

To  Store  or  Not  to  Store 322 

Extremes  of  the  Storage  Problem 323 

Psychological  Factors  in  Storage 324 

Standardization  of  Supplies 325 


'r 


I 


xm 


TABLE  OF  CONTENTS 


TABLE  OF  CONTENTS 


• 


Correct  Definitions 

Inventory  Price  and  Market  Value      .      . 
Storage  Space  and  Production   .... 
Establishing  the  Maximum  and  Mimmum 
The  Financial  and  the  Stores  Departments 


PAGE 

326 
327 

328 
329 
334 


CHAPTER  XVII 

RECEIVING  AND  STORING  RAW 

Equipment  and  Manual  Operations 
Planning  and  Locating  the  Storeroom 
Manual  and  Clerical  Work 
The  Counting  Problem 
Counting  Methods     . 
Weighing  and  Estimating 
Even  Balance  Scale 
Proportional  Scales 

Counting  Machines 

Weighing  Methods 

Trucking  Material 

Conveyors  .      .      •      - 

Sectional  Steel  Bins  and  Shelving 

The  Closed  Type  . 

Open  Shelving      . 

Racks     .      .      •      • 

Open  Air  Storage 

Intensive  Storing 


MATERIALS 


336 

337 

337 

338 

342 

343 

344 

346 

347 

350 

352 

358 

362 

364 

366 

368 

372 

373 


CHAiPTER  XVIII 

STORES  INVENTORIES 

Perpetual  versus  Periodic  Inventories 376 

The  Perpetual  Inventory ^^^ 

The  Physical  Inventory ^^^ 

Ideal  Inventorying 


xv%% 


PAGE 


391 


Posting  Values  on  Stores  Inventory sgg 

Summary    . 

CHAPTER  XIX 

RECEIVING,  INSPECTING,  AND  STORING 

Receiving  Material  at  the  Factory 

Records  of  Goods  Received  ....]]'' 

Value  of  Inspection 

Inspecting  Methods 

Receiving  Material  into  Stores  ...].'].* 

Finished  Material 

Storing  Material 

Identifying  and  Locating  Material       ..!.*!' 
Material  Returned  to  Stores 
Scrap 

Stationery  Stores       .      . 



CHAPTER  XX 

DISTRIBUTION  OF  MATERIAL  FROM  STORES 

Delivery  Problems 

Form  of  Requisitions      .... 

Shortages 

Deferred  Deliveries    . 

"  •  •  •  # 

Issuing  Stores  in  Sets  or  Groups 
Shop  Orders  and  Stores  Requisitions 
Supplies  from  Stores       .... 

Stores  Records 

Stores  Requisitions  on  the  Purchasing  Agent 


394 
396 
398 
399 
402 
402 
403 
404 
405 
406 
407 


410 
411 
412 
415 
417 
418 
420 
421 
424 


PURCHASING  AND  STORING 


CHAPTER  I 
PEELIMINAEY  OUTLINE  OF  PUKCHASING 

Definition.— Purchasing  is  one  of  the  commonest  of 
business  activities.    It  means  the  acquisition  of  some 
kind  of  property  and  the  giving  of  an  accepted  price 
or  consideration  for  that  property.     The  terms  pur- 
chasing and  bujdng  will  be  considered  and  used  as 
convertible  and  synonymous,  although  there  is  a  dis- 
position by  some  to  regard  purchasing  as  implying  a 
transaction  of  more  dignity  and  importance. 
_  Every  transaction  between  buyer  and  seller  involv- 
ing the  transfer  of  property  is  a  contract,  and  these 
contracts  may  take  many  forms.    The  simplest  form 
of  purchase  is  one  whereby  the  negotiations  are  en- 
tirely verbal  and  are  conducted  simultaneouslv  with 
the  transfer   of  the   article   and   the   consideration. 
Other  forms  necessitate  the  issuing  of  orders  specify- 
ing the  material,  price,  and  date  of  delivery;  while 
more  complicated  forms  are   made   the  subject   of 
lengthy  written  agreements  defining  minutelv  in  tech- 
nical terms  the  nature  of  the  material,  methods  of 
payment,  and  many  other  factors.     In   such   cases 
Pliysieal  possession  of  the  property  may  not  pass  to 
tiie  purchaser  until  a  considerable  period  after  the 
agreement  is  made. 


2  PURCHASING  AND  STORING 

Science  of  Purchasing.— Purchasing  is  just  as  much 
a  science  as  any  of  the  other  activities  in  the  great 
complex  structure  called  business.     The  success  or 
failure  of  a  commercial  undertaking  may  be  the  direct 
result  of  good  or  bad  buying.    The  terms  good  and 
bad  are  not  used  here  in  a  speculative  sense.    It  is 
not  intended  to  infer  that  good  buying  implies  sim- 
ply that  one  has  bought  at  the  lowest  market  price 
or  that  bad  buving  means  that  the  highest  price  has 
been  paid.    Poor  buying  means  rather  that  the  pur- 
chasing has  been  done  promiscuously,  loosely,  and 
without  foresight  and  accuracy.    Whereas  good  buy- 
ing is  scientific,  and  can  be  checked  in  many  of  its 
phases  with  the  certainty  of  a  mathematical  problem. 
For  the  power  of  purchasing  to  be  at  its  maximum 
there  must  be   exact  knowledge,  which  is   science; 
knowledge  of  materials,  which  implies  some  knowl- 
edge of  manufacturing  processes;  knowledge  of  mar- 
kets  and  prices;  knowledge   of  sources  of   supply; 
knowledge  of  certain  trade  customs  and  usages,  and 
also  knowledge  of  the  many  ramifications  of  business 
transactions  into  which  the  exercise   of  purchasing 
carries  the  buyer.    Fortunately,  much  of  this  can  be 
formulated,  tabulated,  and  recorded  in  such  shape  as 
to  be  available  for  instant  use. 

Economics  of  Purchasing.— From  the  ine<'ption  to 
the  consummation  of  the  transactions  between  buyer 
and  seller  many  important  economic  problems  are  in- 
volved; and  the  proper  handling  of  these  and  the  ad- 
ministration of  the  business  features  connected  with 
them  are  vital  factors  in  the  operation  of  any  com- 
mercial undertaking. 


PRELIMINARY  OUTLINE  3 

^  Undoubtedly,  regulated  and  right  buying  is  a  study 
m  economics.    If  one  glances  back  over  the  field  of 
endeavor  connected  with  production  and  manufactur- 
ing and  observes  its  tendencies  during  the  past  few 
decades,  it  will  be  noticed  that  intensive  economical 
operation  is  applied  more  closely  as  time  goes  on,  un- 
til a  condition  exists  with  many  concerns  where  they 
save  their  profits  instead  of  making  them,  or  rather 
they  make  their  profits  by  savings.    It  does  not  ap- 
pear that  there  will  be  any  lessening  of  this  tendency, 
ihis  country,  rich  in  natural  resources,  with  a  nation 
ot   born   salesmen   and    advertisers,    has    heretofore 
solved  the  problem  of  enlarging  its  profits  by  making 
more  sales.    Conservation  of  natural  resources,  com- 
petition, shorter  hours  for  workmen  with  increased 
pay,  and  longer  week-ends  for  employers,  have  forced 
a  realization  that  an  increase  of  advertising  and  sell- 
ing expense  will  not  continue  to  increase  the  business 
m  proper  proportion   to   this   increase   of   expense. 
Hence  the  necessity  for  reducing  costs.    Right  buying 
strikes  at  the  very  root  of  the  problem,  as  its  eco 
nomic  value  has  a  vital  bearing  on  the  cost  of  produc- 

Methods.-It  is  essential,  of  course,  to  create  stand- 
aidized  methods  of  purchasing.  These  methods  have 
as  their  object  the  simplification  and  assurance  of  ac- 
curacy of  the  results  to  be  accomplished.  The  sub- 
jugation into  mechanical  habits  of  the  various  pro- 
cesses involved  is  of  the  highest  possible  value.  To 
be  a  slave  to  these  habits,  however,  might  ultimately 
react  against  the  object  sought.  Varying  circum- 
stances and  conditions  will  sometimes  force  one  to  a 


4  PURCHASING  AND  STORING 

contemplation  of  a  change  in  policy  ---f  ^^^^^ 
deviation  in  methods,  and  this  change  could  not  oe 
SproXd  with  an  open  mind  if  the  habxts  had  fast- 
ened themselves  too  closely.  phanae 
Any  change  in  methods,  however   does  ^ot  chan^^ 
the  fundamental  principles  of  purchasing,  ^^^f^^^ 
clear  and  well-lefined.     These  P""^^?^,  ^^^l^'^^;. 
orio-in  in  past  experiences  and  rules  laid  do^n  by  ac 
Tpfed  authorities.    To  question  these  doctrines  i    to 
question  their  authority.    But  a  mmd  tramed  in  con 
structive  thinking  would  not  be  ^o^t^"*  ^f/^^^^X^^^ 
present  standards  of  purchasing  to  ^^^^'I'^J^l^^ 
ence    indefinitely    without    attempts    at    ^e   «rmcnt^ 
These  attempts  will  be  along  the  lines  of  system  and 
iieSods  which  must  always  be  flexible  enough  in 
E  nature  to  be  permitted  to  adjust  themse  -^^^^^ 
varying   situations   without  in    any   way  d'  ^r^*  t^^S 
Irom  tie  fundamental  principles  for  which  they  are 

'""Thf^urchasing     Department.-The     instrument 
through  which  the  buying  is  done  in  indastnal  es- 
tablishments is  the  purchasing  department;  ami  the 
evolution  and  growth  of  this  unit  in  the  industrial 
organization  has  been  continuous  and  constantly  gam- 
ing in  importance.     The  necessity  for  centra  .zmg, 
systematizing,  and  controlling  purchases  le.   to  the  al- 
location of  part  or  the  whole  of  the  time  of  one  man, 
or  of  several  men,  to  do  the  work  as  conditions  de- 
mand.   The  organization  of  establishments  along  the 
lines  of  departmental  formation  further  ^suited  m 
the  segregation  of  these  activities,  and  thereby  the 
purchasing  department  came  into  existence. 


PRELIMINARY  OUTLINE  5 

It  is  essential  that  the  work  of  the  department  be 
efficiently  and  expeditiously  carried  through,  for  the 
demands  on  it  grow  naturally  from  the  requirements 
ot  the  business  and  do  not  originate  with  the  depart- 
ment itself.  The  material  needs,  except  actual  cash, 
of  every  department  or  section  of  an  establishment 
should  be  procured  and  furnished  to  them  by  the  pur- 
chasing department.  For  this  reason  it  probably 
comes  into  more  direct  contact  and  at  more  frequent 
intervals  with  the  other  departments  than  any  other 
division  of  an  organization. 

Not  only  in  inter-department  relations  is  the  pur- 
chasing department  particularly  active,  but  in  its 
commercial  dealings  it  comes  in  contact  with  out- 
side concerns  to  a  greater  extent  than  anv  other  de- 
partment, except  perhaps  the  sales  department-and 
mad?°^  establishments  even  this  exception  cannot  be 

In  any  walk  of  life,  when  our  material  necessities 
are  not  promptly  and  satisfactorily  furnished  we  are 
apt  to  criticize  those  whom  we  regard  as  responsible 
for  furnishing  them  or  to  whom  we  look  as  the  source 
through  which  we  procure  them.  The  conditions  re- 
ferred to  in  the  preceding  paragraphs  naturally  place 
the  purchasing  department  in  a  position  of  vulner- 

consL^.rir'^^'f '"*'  ^"^  '"*^'^^"-    0"  *»»'«  ^<"^o™t 
considerable  diplomacy  and  tact  are  essential  features 

in  purchasing  work;  and,  to  confound  the  criticizers 
fficiency  must  be  the  watchword.    "We  don't  know,"' 
Should  never  be  the  answer  to  questions  regarding 
dehvery,  to  requests  for  prices,  or  to  queries  why  in 
voices  have  not  been  approved. 


6 


PURCHASING  AND  STORING 


Creative  Work. — From  what  has  already  been  said 
and  from  the  conditions  which  are  usually  supposed 
to  surround  purchasing  it  might  i)e  assumed  that  its 
function  is  largely  negative.  This  supposition  is 
mainly  caused  by  the  fact  that  the  developments 
which  originate  the  demand  for  purchasing  are  in- 
itiated through  other  departments. 

Every  business  activity,  however,  must  progress  to 
some  extent  by  creative  work  within  its  own  spheres 
of  influence.  Opportunities  for  this  are  greater  with 
some  activities  than  with  otheit*.  The  mission  of 
purchasing  would  not  be  fulfilled  if  it  did  not  join 
in  this;  it  would  be  stagnant,  and  progress  in  the  art 
of  buying  would  be  at  a  standstill. 

It  has  been  customary  to  leave  questions  affecting 
the  suggestion  and  utilization  of  new  goods  for  old 
purposes  or  old  goods  for  new  purposes  to  the  sales . 
department.  This  has  been  natural,  because  the  vo- 
cation of  a  salesman  should  familiarize  him  with  the 
market  for  the  products  of  his  factory.  But  there  is 
the  other  side  of  this  matter  to  be  considered,  and 
ideal  purchasing  will  mean  that  it  shares  with  selling 
in  the  creation  and  development  referred  to.  This  is 
possible  because  men  engaged  in  buying  come  into 
touch  with  markets  which  the  selling  force  probably 
never  see  or  hear  of.  The  creative  instinct  in  men 
engaged  in  purchasing  could  not  fail  to  be  aroused 
by  new  devices,  new  material,  or  articles  which  they 
might  find  applicable  to  the  manufactures  and  prod- 
ucts of  their  own  concern.  In  this  way,  selling  and 
purchasing  will  jointly  share  in  the  creative  work  and 
progressive  development. 


PRELIMINARY  OUTLINE  7 

For  the  purchasing  agent  this  would  be  constructive 
activity  of  the  highest  order,  and  would  mean  that 
he  would  be  instrumental  in  improving  and  bringing 
forward  goods,  not  only  for  his  own  concern,  but  for 
many  others.  If  this  seems  idealistic  to  any  one  he 
has  only  to  look  back  over  the  field  of  endeavor  in 
any  industry  or  profession  and  review  what  has  been 
accomplished  and  the  progress  made,  and  ask  himself 
if  this  progress  has  any  finality.  If  it  has  none,  then 
there  is  no  finality  to  progressive  developments  in 
purchasing.  And  it  is  exactly  this  which  will  ulti- 
mately prove  for  purchasing  its  measure  of  fitness  and 
determine  its  relation  to,  and  place  in,  the  world  of 
business. 

Policy.— The  selling  department  of  an  organization 
will  make  strenuous  efforts  to  establish  a  reputation, 
not  only  for  the  product  it  sells,  but  for  its  selling 
policy.  This  reputation  will  be  assiduously  and  jeal- 
ously guarded;  and  the  policy,  strictly  maintained  on 
the  standards  adopted,  will  be  considered  one  of  its 
greatest  assets.  It  is  equally  essential  for  a  purchas- 
mg  department  to  establish  for  itself  a  policy  based 
on  recognized  standards  of  business  morality  and 
ethics. 

The  value  of  this  will  be  appreciated  in  the  treat- 
ment accorded  to  the  purchasing  department  in  the 
multifarious  dealings  and  debatable  questions  which 
otten  come  up  between  it  and  the  many  concerns  with 
whom  it  has  negotiations  and  transactions. 

The  characteristics  displayed  by  a  purchasing  de- 
partment will  determine  its  standing  in  the  business 
community.    It  is  not  just  a  matter  of  business  mor- 


I 
it 


r. 


8 


PURCHASING  AND  STORmG 


PRELIMINARY  OUTLINE 


als,  but  of  knowledge  of  business  methods  and  usages. 
Ignorance  of  these,  intolerance,  lack  of  courtesy,  and 
high-handedness  will  do  more  harm  to  efficient  pur- 
chasing than  plain  crass  ignorance  regarding  the  ma- 
terial being  bought.  Vendors  are  quick  to  sense  these 
things,  and  their  attitude  and  actions  will  be  largely 
based  on  them. 

The  acquisition  of  raw  material  is  the  initial  step 
incurred  in  the  cost  of  manufacturing  anything. 
Equipment  and  tools  of  the  necessary  character  nmst 
be  procured  before  production  work  can  proceed. 
Supplies  also  must  be  accumulated  for  use  in  the 
operation  of  the  plant.  The  deduction  to  l)e  drawn 
from  this  is  that  starting  right  means  buying  right. 

Six  Great  Divisions.— The  activities  of  purchasing 
for  an  industrial  establishment  can  be  classed  under 
six  headings.  These  are  the  six  main  divisions,  each 
of  which  can  be  subdivided  into  manv  minor  activi- 
ties.  A  diagrammatic  survey  of  the  principal  on(»s  is 
given  in  Figure  1.  Eeference  to  this  will  gri^atly  fa- 
cilitate a  comprehensive  grasp  of  the  probh^m  as  a 
whole  and  some  of  its  minor  features  and  d(?tails. 

Amplification  of  these  divisions  is  given  in  the  fol- 
lowing brief  description: 

T.  The  Article.  This  naturally  comes  first,  because  unless 
there  was  something  to  be  bought  there  would  l)e  no  buy- 
ing to  be  done. 

a.  Authentication  of  the  request  to  purchase. 

h.  Knowledge  that  it  is  the  article  best  suited  for  the 

intended  purpose. 
c.  An  accurate  definition  which  will  completely  pre- 
clude the  possibility  of  confusion  with  any  other 
article. 


Figure  1.— Diagram  of  the  six  great  divisions  of  purchas- 
ing WORK,  WITH  some  OF  THE  SUBDIVISIONS 

d,  A  correct  specification  or  description  of  quality. 

e.  Knowledge  of  the  quantity  to  be  purchased. 

A  Knowledge  of  the  principal  characteristics  and  the 
processes  through  which  the  article  passed  prior 
to  arriving  at  the  condition  in  which  it  is  to  be 
bought. 

9'  The  date  on  which  delivery  is  required. 


10 


PURCHASING  AND  STORING 


PRELIMINARY  OUTLINE 


11 


2.  The  Seller.    The  second  stage  is  to  form  connections  with 

vendors. 

a.  Locating  the  best  sources  from  which  the  particular 
article  can  be  obtained. 

h.  Elimination  of  economic  losses  by  avoiding  wrong 
sources  of  supply. 

c.  Investigation  of  reliability  of  seller  and  methods  of 

doing  business. 

d.  Securing  assurance  of  ability  to  deliver  at  required 

date. 

e.  Ascertaining  location  of  shipping  point  and  consid- 

ering its  relation  to  delivery  point  with  special 
reference  to  transportation  facilities. 

3.  The  Price.     Establishing  the  consideration  with  the  seller. 

a.  Price  knowledge. 

h.  Securing  competitive  quotations. 

c.  Knowledge  of  how  to  obtain  the  best  price. 

d.  Consideration  of  price  in  its  relation  to  quality  and 

service. 

e.  Knowledge  of  available  quantities  and  existing  de- 

mands. 

4.  The  Contract.    Issuing  the  order  or  making  the  contract, 

and  agreeing  and  arranging  with  the  seller  the  various 
clauses  and  stipulations. 

a.  Embodying  in  the  contract  the  features  outlined  in 
above  divisions,  1,  2,  and  3,  as  to  quantity,  quality, 
and  price. 

h.  Arranging  f .  o.  b.  point. 

c.  Agreeing    as   to    payment    of   freight   or   delivery 

charges. 

d.  Arranging  terms  and  method  of  payment. 

e.  Securing  best  cash  discount. 

/.    Reviewing  legal  aspects  of  contract. 

5.  The  Delivery.     Securing  physical  possession  of  the  prop- 

erty. 

a.  Institution  of  a  follow-up  system. 


6.  Keeping  the  seller  up  to  the  terms  of  contract. 

c.  Inspecting  material  in  course  of  manufacture  or  as 

shipped. 

d.  Recording  shipments  or  deliveries  made. 

e.  Keeping  track  of  shipments  in  hands  of  transporta- 

tion companies. 

/.    Following  up  and  tracing  shipments. 
g.  Final  receipt  of  goods  at  destination. 

6.  The  Consideration.  In-so-far  as  the  purchasing  depart- 
ment is  concerned  this  means  approving  the  invoice  and 
seeing  that  it  is  in  proper  shape  for  payment. 

a.  Checking  with  contract  for  quantity. 

h.  Approving  price. 

c.  Seeing  that  terms  and  cash  discounts  are  correctly 

stated  in  the  invoice. 

d.  Checking  extensions  and  calculations  on  the  invoice. 

e.  Securing  certification  of  receipt  of  goods. 
/.    Properly  classifying  the  charge. 

g.  Finally  approving  for  payment. 

The  knowledge  element  and  mechanical  aids  essen- 
tial to  a  systematic  study  and  understanding  of  the 
six  great  factors  in  purchasing  will  be  dealt  with 
fully  in  proper  sequence  in  later  chapters. 

It  is  necessary  for  any  student  of  this  function  of 
business  to  get  a  comprehensive  grasp  of  the  funda- 
mentals outlined.  It  will  then  be  much  easier  to  as- 
simulate  the  minor  problems  in  connection  with  them 
as  they  arise  for  discussion. 

Corelation  of  the  Divisions.— Purchasing  can  only 
be  conducted  at  the  highest  percentage  of  efficiency 
when  each  of  the  fundamentals  receives  proper  at- 
tention. A  chain  is  as  strong  as  its  weakest  link,  and 
this  axiom  can  be  applied  with  unusual  force  to  the 


12 


PURCHASING  AND  STORING 


PRELIMINARY  OUTLINE 


13 


links  in  purchasing.  If  material  is  incorrectly  or  In- 
adequately specified  or  defined,  the  price  obtained 
might  be  useless,  or  at  least  subject,  to  revision.  If 
the  order  is  not  accurately  worded,  the  wrong  ma- 
terial may  be  delivered.  If  the  material  is  correctly 
specified,  the  lowest  price  obtained,  and  the  order  is- 
sued to  the  firm  best  suited  to  supply  it,  still  all  these 
advantages  might  be  nullified  if  delivery  were  not 
made  as  required.  Lastly,  assuming  that  all  phases 
of  the  transaction  have  been  taken  care  of  in  an  ade- 
quate manner  down  to  the  receipt  of  the  invoice  and 
this  is  allowed  to  go  through  for  payment  not  in 
accordance  with  the  agreed  price'  or  terms,  all  the  (eco- 
nomic benefits  secured  by  the  good  work  done  up  to 
this  point  might  be  lost.  This  emphasizes  the  inter- 
dependence of  each  section  of  the  work;  and  no  one 
part  of  it  can  be  overlooked,  relegated  to  the  back- 
ground, or  treated  as  negligible. 

Simply  placing  orders  is  but  a  small  part  of  the 
work  and  cannot  rank  as  purchasing.  What  it  is  de- 
sired to  emphasize  is  that  there  is  a  well-defined  be- 
ginning and  a  logical  conclusion  to  purchasing,  and 
all  the  intermediate  activities  between  those  points 
must  be  carried  through  on  a  basis  of  equal  efficiency 
to  insure  the  successful  operation  of  this  department 
of  business. 

The  purchasing  agent  is  responsible  up  to  the  time 
the  material  arrives.  Unless  it  is  delivered  to  the 
plant  within  a  given  time  determined  by  the  produc- 
tion department,  the  whole  scheme  of  economical  shop 
operation  is  jeopardized.  Not  only  this,  but  it  might 
entail  delays  in  filling  contracts  entered  into  by  the 


( 


sales  department,  involving  the  contingencies  of  the 
loss  of  customers'  good  will  and  the  possibility  of 
being  mulcted  for  penalties  on  account  of  non-deliv- 
ery. 

There  is  a  triangle  of  expenditures  that  go  to  make 
up  the  cost  of  any  manufactured  product;  this  tri- 
angle is  composed  of  material — labor — overhead 
charges.  The  last  named  is  frequently  determined  by 
conditions  and  location.  Trading  and  bargaining 
with  labor  is  strictly  limited.  Neither  of  the  two 
mentioned  can  be  bought  when  the  market  is  low 
and  stored  for  future  use.  The  other  leg  of  the  tri- 
angle— material — is  most  susceptible  to  control 
through  good  judgment,  foresight,  and  selective  abil- 
ity. For  these  reasons  the  importance  of  purchasing 
is  being  increasingly  recognized. 


THE  ARTICLE 


15 


i 


CHAPTER  II 
THE  ARTICLE 

Specifications  and  Definitions.— In  making  the  di- 
visions of  purchasing,  as  shown  in  the  previous  chap- 
ter, the  premier  place  was  given  to  the  *' article,"  or 
the  material  to  be  purchased.  The  reason  for  this  is 
obvious,  since  it  is  apparent  that  unless  on(i  knows 
what  is  to  be  bought,  purchasing  could  not  proceed. 
By  placing  it  first,  however,  it  is  not  intended  to  give 
it  undue  importance  over  any  other  phase  of  the 
work.  To  specify  means  to  be  explicit;  to  be  definite; 
to  describe  accurately.  This  subject  of  correct  speci- 
fications is  of  great  importance,  and,  in  many  re- 
spects, it  may  be  said  to  be  the  most  important  thing 
in  purchasing. 

Appropriate  to  this  subject  is  the  following  quota- 
tion from  the  Report  of  The  Bureau  of  Supplies  of 
New  York  City: 

Nothing  should  be  left  to  the  imagination  in  the  writing  of 
specifications.  If  the  man  desiring  an  article  purchased  or  a 
piece  of  work  done  knows  what  he  wants,  let  him  describe  it  in 
straight,  clean-cut,  unmistakable  language.  This  takes  more 
time,  but  it  is  worth  it.  Adjectives  and  adverbs  are  particu- 
larly objectionable.  To  say  that  work  must  be  done  **  prop- 
erly,'' or  ** suitably,*'  or  in  a  ** workmanlike  manner"  does 
not  really  mean  anything,  because  what  one  man  will  consider 
** proper"  or  ** suitable"  another  man  holds  to  be  quite  the 

14 


contrary.  Such  expressions  cause  great  uncertainty,  they  de- 
velop confusion,  misunderstandings,  hard  feelings,  and  de- 
lay; and  they  contain  such  opportunities  for  unfairness  and 
graft  that  they  should  not  be  tolerated.  The  clause  that  work 
must  be  done  or  supplies  delivered  ' '  to  the  satisfaction  of  the 
engineer  or  inspector"  causes  every  prudent  contractor  to  bid 
high  in  self  defense. 

Broadly  speaking,  from  a  purchasing  standpoint 
all  material  can  be  divided  into  two  classes  for 
specification  purposes.  One  class  covers  material 
which  it  is  necessary  to  describe  in  detailed  technical 
terms,  or  which  has  to  pass  inspection  other  than  that 
usually  given  to  incoming  material,  or  which  is  sub- 
ject to  special  tests.  The  other  class  covers  material 
for  which  there  are  well  recognized  standard  com- 
mercial definitions. 

Material  Specifications.— The  first  class  referred 
to  usually  comprises  material  of  a  certain  grade, 
quality,  or  texture  pre-determined  by  the  technical 
staff  as  most  suitable  for  the  product  into  which  it 
enters.  Probably  exhaustive  and  expensive  experi- 
ments have  resulted  in  the  selection  of  this  material, 
and  it  is  no  part  of  the  duties  of  the  purchasing  staff 
to  question  the  specifications.  It  is  their  province, 
however,  to  buy  it,  when,  and  as  required,  in  the 

quantities  requisitioned  and  get  delivery  at  the  stated 
time. 

To  enable  this  to  be  done  there  must  be  in  the  files 
of  the  purchasing  department  complete  detailed  speci- 
fications. It  is  not  sufficient  for  these  specifications 
to  be  held  by  the  engineering  or  production  depart- 
ment and  sent  to  the  purchasing  department  with  the 
requisition  for  material.    Emergencies  frequently  re- 


16 


PURCHASING  AND  STORING 


quire  prompt  action  in  purchasing,  and  to  be  depend- 
ent on  some  other  department  for  any  information 
requisite  to  making  the  purchase  means  delay. 

The  technical  staff,  having  prepared  the  specifica- 
tions, should  have  them  properly  numbered  and 
should  retain  the  master  copies,  furnishing  an  ample 
supply  to  the  other  departments  interested.  The 
specifications  can  be  printed,  if  sufficient  quantities 
warrant  it,  or  they  can  be  typewritten  or  blue  printed. 
The  number  required  for  purchasing  purposes  will 
depend  entirely  ou  how  often  the  material  is  bought, 
how  many  firms  are  asked  to  bid  on  it,  and  on  the 
number  of  orders  issued.  When  an  order  is  sent  to  a 
vendor  for  material  described  in  a  separate  specifica- 
tion, a  copy  of  the  specification  should  accompany  the 
order,  distinctly  identifying  it  with  the  order  by  in- 
serting a  clause  reading,  ''This  material  to  b(?  in  ac- 
cordance   with    our    specification    No.    ,    dated 

,  which  is  attached  to  and  forms  a  part  of 

this  order." 

Even  though  the  firm  receiving  the  order  already 
has  a  copy  of  the  specifications,  which  it  may  have 
retained  when  quoting,  another  copy  should  never- 
theless be  sent  with  the  order. 

The  best  method  of  filing  these  specifications  is  in 
folders  similar  to  correspondence  folders,  although 
the  extension  or  bellows  type  may  be  necessary  where 
large  numbers  are  kept.  Card  indexing  them,  as 
shown  in  Figure  2,  will  make  them  available  for  rapid 
reference  and  of  immediate  use  for  mailing.  Nota- 
tions should  always  be  kept  of  all  revisions.  The 
identification  of  these  revisions  by  dates  or  by  pre- 


THE  ARTICLE 


17 


MATERIAL 


Specification  No. 


Folder  No. 


Original  Date. 


Revision  Dates. 


Also  refer  to 


riG.  2.      INDEX  CARD  FOR  SPECIFICATIONS 

In  starting  a  new  set  of  specifications  it  is  possible  to  have  the 

specification  and  folder  number  correspond 

fixing  a  letter  to  the  number  is  the  duty  of  the 
technical  staff,  and  can  be  done  in  much  the  same 
manner  as  revisions  on  tracings. 

It  is  sometimes  necessary  to  send  out  blue  prints 
or  sketches  to  bidders  and  with  orders.  It  is  not 
suggested  that  copies  of  these  be  kept  in  the  purchas- 
ing department.  The  technical  department,  having 
charge  of  the  original  drawings  and  tracings,  should 
be  able  to  furnish  prints  promptly;  but  it  is  essential 
that  such  sketches  be  identified  with  the  order  in  a 

manner  similar  to  that  suggested  for  the  specifica- 
tions. 

Equipment  Specifications.— Establishments  of  suffi- 
cient magnitude  have  a  competent  man  or  department 
to  take  entire  charge  of  equipment,  and  usually  this 
man  or  department  is  responsible  for  keeping  a  com- 
plete record  of  all  machine  tools,  shop  equipment,  and 
plant,  including  engines,  boilers,  dynamos,  inside  and 


18 


PURCHASING  AND  STORING 


outside  cranes,  etc.  It  is  part  of  his  duties  to  keep  a 
record  of  these  and  to  be  able  to  furnish  to  the  pur- 
chasing department  a  complete  description  of  any 
part  that  it  may  be  necessary  to  buy. 

It  is  not  conjecture,  for  experience  has  proven,  to 
state  that  a  great  many  plants  keep  no  records,  or  at 
best  very  incomplete  records,  of  their  equipment.  In 
such  concerns  when  a  breakdown  occurs  and  it  be- 
comes necessary  to  procure  parts  quickly,  the  efforts 
to  do  so  involve  a  great  waste  of  time,  much  corre- 
spondence, and  even  at  times  finally  shipping  the 
broken  parts  to  the  manufacturer  when  all  other  at- 
tempts to  identify  or  describe  the  requirments  have 
failed.  In  factories  where  such  conditions  exist  the 
purchasing  department  can  render  an  exceptional  ser- 
vice by  keeping  a  record  of  all  equipment  purchased. 
It  can  obtain  from  the  manufacturers  a  complete 
specification  of  the  machine,  with  illustrations  or 
prints,  with  the  invoice.  These  can  be  filed  in  a 
similar  manner  to  the  material  specifications.  Al- 
though it  is  scarcely  the  province  of  the  purchasing 
department  to  keep  a  card  system  of  plant  and  ma- 
chine tool  records,  yet,  in  the  absence  of  complete 
records  in  any  department,  it  can  certainly  render 
good  service  if  it  keeps  track  of  its  purchases  of  these 
items. 

Coal  Specifications.— Other  specifications  which 
could  well  be  handled  in  the  same  manner  as  the 
material  specifications  are  those  for  coal,  oil,  and 
paints,  if  bought  in  sufficiently  large  quantities.  Coal 
should  always  be  bought  on  a  B.  t.  u.  basis,  with  some 
limits   specified,  probably,  as   to   the  percentage   of 


THE  ARTICLE 


19 


(mLr 


D**         T 


ll 


HEXAGON  FLAT  OVAL 

HEAD  FILLISTER      FILLISTER 

HEAD  HEAD 


r  m 


BUTTON 
HEAD 


CAP  SCREWS 


DEFINITION: 


Cap  screws  are  milled  from  bars  slightly  larger  than  the  size  of  finished  head.  Heads  are  true  with 
the  body.  Cap  screw*  are  finished  all  over.  Threaded  portion  equals  three-quarters  of  the  length 
of  screw  up  to  and  mcludmg  4 '  in  length;  over  4 '  long  threaded  portion  equals  one-half  the  length.  If 
special  length  of  thread  is  required,  same  is  to  be  furnished  per  drawings  or  specifications. 
Special  length  of  thread  to  be  specified  only  where  standard  cannot  be  used. 

Cap  screws  vary  in  length  by  quarter  inch  from  }'  to  5'  long  inclusive  and  by  half  inch  from  SI' 
up.  although  seldom  used  over  5'  long.  These  are  standard  variations  and  must  be  used  wherever 
possible. 

For  dimensions  for  heads  of  cap  screws  see  table  "Dimensions  of  Cap  Screw  Heads."  15204  Data 

Class. 

Hexagon  head  cap  screws  are  not  to  be  used  when  a  regular  hexagon  head  tap  bolt  wUI 
answer  the  purpose. 

Cap  screws  when  made  of  machinery  steel  must  have  a  tensile  strength  of  not  less  than  SO.OOO 
pounds  per  square  inch. 

Cap  screws  with  Flat  fillister.  Oval  fillister,  Rat  or  Button  heads  are  not  t*  be  used  in 
sizes  of  J •  or  less.     If  this  style  head  is  required  in  sizes  of  J*  or  less,  us*  Machine  Screws. 

For  lists  of  cap  screws  giving  Part  Numbers,  see: 

11189  Table  Class  for  Flat  fillister  head 

"90 Flat  head 

"91     Oval  fillister  head 

1192     "        "       "    Button  head 
"93     ••       f      "   Hexagon  head 

SPECIFICATIONS  FOR  PURCHASE  ORDERS  AND  SfSCK  LEDGER  SHEETS. 


Head  Cap  Screws  threaded  U.  S.  S. 


(Hexagon 
Flat  fillister 
Oval  fillister" 
Flat 
Button         J 

Example:    25— |'  x  4*  hex.  head  cap  screws,  threaded  U.  S.  S. 
(If  special  length  of  thread  is  required,  specify  the  length  in  inches). 


FIG.  3.      STANDARD  DESCRIPTIONS  AND  DEFINITIONS 


20 


PURCHASING  AND  STORING 


THE  ARTICLE 


21 


sulphur,  volatile  matter,  and  ash.  Each  car  load  of 
coal  bought  on  this  basis  should  be  sampled  and 
analyzed.  This  can  be  done  for  a  few  cents  a  ton, 
and  the  premium  may  be  paid  or  penalty  deduct  ed  on 
the  analytical  results.  There  is  now  no  difficulty  in 
getting  coal  merchants  to  sell  on  these  conditions. 

In  spite  of  this  fact,  there  are  as  yet  very  few  in- 
dustrial plants  buying  coal  on  the  basis  of  calorific 
value.  It  is  a  common  practice  to  buy  it  on  the  repu- 
tation of  the  mine.  But  would  one  buy  gold,  silver, 
or  iron  ore  because  it  was  mined  in  a  certain  district? 
Certainly  one  would  have  it  assayed.  The  process  of 
determining  the  value  of  coal  is  not  complicated  or 
expensive;  hence,  considering  the  enormous  consump- 
tion, it  is  only  natural  and  fair  that  consumers  should 
insist  on  payment  being  made  on  the  results  of 
analytical  tests. 

Moreover,  when  coal  is  bought  on  the  assumption 
that  it  is  good  because  it  is  from  a  mine  with  an 
established  reputation,  it  is  difficult  to  take  advantage 
of  competition.  In  fact,  there  can  be  no  real  com- 
petition under  such  conditions.  Each  dealer  will 
claim  his  coal  is  equal  or  superior  to  some  other; 
but  statements  of  this  character  have  no  foundation 
in  fact  unless  proven,  and  the  only  proof  is  the  con- 
sumer's analytical  test.  It  is  essential  to  determine 
also  the  size  of  coal  best  suited  for  the  particular 
style  of  grate  bars  used  in  the  construction  of  the 
boilers;  or,  if  mechanical  stokers  are  used,  the  speed 
of  these  and  their  method  of  operation  may  influence 
a  decision  as  to  size  of  coal.  The  customary  method 
of  defining  size  of  coal  as  buckwheat,  pea,  nut,  etc., 


i  FIG. -4 

COMPRESSION    SPRINGS 
(Helical) 


FIG.-9 
TENSION  SPRINGS 


UIJ 

FIG. -12/^. 
TORSION  SPRINGS 


SPRINGS 


DEFINITION  r 


«>.i,!nn"^r^K^'  construction  those  members  that  are  to  yieldingly  resist  force  and  regain  their  original 
position  or  shape  at  the  removal  of  the  force  are  called  springs. 

They  are  made  in  an  endless  variety  of  forms  and  are  used  for  many  distinct  classes  of  service 

-Com^.^^  ^^^^  ^'''^  TJ  ^.  ^'"""^^  ^'°  ^^'^  ^°"°*^8  «='^^S'  ^^'^^  indicate  their  use  or  function 
«-ompression,  lension  and  Torsion. 

foUo^ed'on  In"drawings^^'  ^^  '*'°*"  ''*^''^'  ^'°  "^^  ^^"^"'  ""^^^^  ""^  dimensioning  that  should  be 
In  dimensioning  or  specifying  springs,  the  foUowing  information  must  always  be  given. 

Comprettion  Springs  (Helical) 

^'*'  thr'!n!!!f„^l''1l''',^l^^'  °'  '"''"^^  '^'^'""^^  depending  upon  which  is  the  most  important      If 
»  11  IS  to  fit  over  a  spmdle  or  similar  part,  the  mside  diameter  would  be  of  the  most  importance 


FIG.  4.      STANDARD  DESCRIPTIONS  AND  DEFINITIONS 


22 


PURCHASING  AND  STORING 


must  sooner  or  later  disappear,  and  dimensional  sizes 
will  be  specified.  In  European  countries  this  change 
has  already  taken  place,  and  contracts  can  be  placed 
containing  a  clause  specifying  the  size  of  mesh  of  a 
screen  over  which  the  coal  shall  pass  and  the  size  of 
mesh  through  which  it  shall  fall,  with  a  stipulated 
percentage  of  coal  smaller  than  the  screen  it  passes 
over  to  cover  breakage  in  handling. 

Standard  Commercial  Definitions.— The  other  class 
of  material  referred  to  in  the  opening  of  this  chapter 
includes  material  for  which  there  are  standard  or 
well-recognized  trade  definitions.  In  industrial  estab- 
lishments the  orders  issued  for  such  material  are 
usually  far  more  numerous  than  for  any  other  class 
of  material,  and  include  orders  for  small  tools  and 

nearly  all  supplies. 

Probably  more  trouble  is  experienced  by  the  pur- 
chasing department  in  dealing  with  these  purchases 
than  with  any  others,  and  this  trouble  is  caused  solely 
by  incorrect,  improper,  inaccurate,  or  incomplete  de- 
scriptions, which  may  arise  from  the  fact  that  varying 
methods  of  defining  an  article  are  used  by  different 
departments  and  individuals.  This  leads  to  con- 
fusion, and  compels  the  purchasing  department  to 
refer  back  to  the  storekeeper  or  to  some  other  in- 
dividual who  drew  up  the  requisition.  Delay  and  ex- 
pense are  thereby  entailed,  besides  other  annoyances. 

The  existence  of  this  condition  is  demoralizing  to 
the  internal  economic  administration  of  an  establish- 
ment. Not  only  is  an  inordinate  amount  of  time 
consumed  in  getting  requisitions  into  shape  for  price 
getting   and   ordering,  but   delays   occur   in   placing 


THE  ARTICLE 


23 


fIG.-l 
PUIN  TYPE 


DEFINITION: 


FIG.-2 
RIB  TYPE 


LOCK  WASHERS 


FIG. -3 
POSITIVE  TYPE 


The  matenal  used  in  the  manufacture  of  spring  lock  washers  is  steel 
is  wi^ir"'"'"'  •'••"'"**  '•"•*  ""'"'••  ^^^^  *»•'  '^^'^'-^  -"d  also  type,  if  other  than  PI«in  type 
#5213  Dafi  aa"sf "'  "'  '*"''"**  ''"'*  ""•^"''  ^'  ^^^'^  "Dimensions  of  SUndard  Lock  Washers" 

<lJelTi;^''Z  L":Jorj;'S;''''  '""  "•""•''  ^^  ^^^"  °"  ^^'^  '«"  ^^^  ^la^s.  state  bolt 
For  list  of  standard  lock  washers  giving  Part  Numbers,  see  f  120S  Table  Class. 

SPECIFICATIONS  FOR  PURCHASE  ORDERS  AND  STOCK   LEDGER  SHEETS. 

Quantity.  Bolt  Diam..  Name  of  Part.  Type.  Size  of  Steel. 

txample:    500-r  lock  washers,  plain  type.  5/32'  x  3/32'  steel. 

SPECIFICATIONS  FOR  STOCK  OR  SHOP  LISTS  AND  REQUISITIONS. 

Quantity.  Bolt  Diam.,  Name  of  Part.  Type 

Example:    SO-f  lock  washers,  plain  type. 

SPECIFICATIONS  FOR  DRAWINGS  AND  ENGINEERING  PART  LISTS. 

^^T  'S'i^^T  °^  ^^-  ^'''^^-  '^y^'  P^  Number, 
txample,    SO-f  lock  washers,  steel,  plain  type,  Part  No.  7374. 


^IG.  5,     STANDARD  DESCRIPTIONS  AND  DEFINITIONS 


24  PURCHASING  AND  STOEING 

orders  which,  in  the  case  of  a  **rush"  requisition  for 
some  emergency,  might  involve  serious  results. 

The   purchasing  department   cannot   afford  to   let 
these  inadequate  definitions  get  past  it.    If  requests 
for  quotations  or  orders  carry  an  ambiguous  mean- 
ing and  are  sent  to  suppliers  and  vendors,  the  trouble 
is  sown  broadcast  among  them,  and  will  cause  further 
losses  and  delays.    Quotations   received  from  them 
could  not  be  considered  absolutely  reliable  for  com- 
parative purposes,  and  wrong  material,  even,  might 
be  shipped  simply  because  the  order  was  worded  m 
such  a  way  that  it  could  be  read  to  mean  more  than 
one  grade,  or  style,  or  quality. 

Unfortunately,  this  condition  is  prevalent  to  a  de- 
gree little  imagined  by  those  not  engaged  in  pur- 
chasing work,  and  its  influence  on  the  economics  of 
business  is  far  reaching.  But  this  phase  of  the  mat- 
ter will  be  discussed  in  another  chapter  and  the 
present  discussion  limited  to  suggestions  and  methods 
for  elucidating  and  solving  the  problem  of  correct 

definitions. 

Examples  of  Improper  Descriptions.— A  better 
understanding  of  this  problem  can  be  gathered  by 
taking  a  few  specific  instances  which  have  arisen  in 
the  writer's  personal  experience. 

A  requisition  was  received  reading: 

12  Gross  Hack  Saws. 

Of  course,  hack  saws  are  made  in  any  number  of 

sizes  for   a  large   variety   of   purposes.    What   was 

actually  required  was  twelve  gross  of  fourteen  mcli 

hack   saws,   fourteen  teeth   to   the   inch,   for  power 


THE  ARTICLE 


25 


DEFINITION! 


MACHINE  KEYS 


^^■•"^^r.:^^^^^  -ne..  eea..  .eaves, 

and  sS«r  ict''^  ""* '''  ''"°^'  ^^""^  ^'^^-  ^^  P-^^'  ^^y^'  Taper  Keys.  Disk  Keys 
shafts' f1J';?<k''S!''  '"^''"'  ''^''''  "'^  '"°^'°"  ^'  ""^^  ™^'°"  P^'^  ^0  ^  axis  of  the 

Of  this  kind  has  a  head'^U^is'Si  S'^crr-Hrd^'Cr Fif  ^^  """"'^-    '' '  ''' 
Th.  .Undard  t.per  for  •  machine  key  equ.U  T  for  each  12'  of  length.  * 

disk     tJiS^      '"°''  commonly  used  key  of  this  class  is  the  "Woodniff."    These  keys  are  a  half 

J^^bo^\KEoTrs^ayrtit^^^^^^^^ 

b.  fot:::,  o™:,r;,!^:3„"r'°""  '•""•  ""•  *'•  »•"""  '"•^•^'^  °'  dimensioning  th.t  .houW 

widti;''dei;r".nrLith'""''"'  •""•  •**""''  ""'^*  •"  «'^*"  ■"  ^^^^  '•"--«  -*««'.  ^■■ 

If  roiidlTielJ^Tedlh.^H""'':'?"^  "i*'""'  •"""*  ^^'  ""''"  <>»»»---  -P-'M. 

otherwise  siSiJS.'*''^"'  '^'  '"^^  *'"  *^^^  ^  ^^^'"^  ^^  ^o  o^-half  the  width  of  the  kerunless 

otheSSe^Stl"'^  "  ""'  manufacture  of  machine  keys  is  machinery  steel  and  wiU  be  used  unless 
SPECIFICATIONS  FOR  PURCHASE  ORDERS  AND  STOCK  LEDGER  SHEETS. 


Quantity.  Width  X  Depth  X  Length 


Standard  taper  key 
Standard  taper  gib  head  key 
Straight  key 
Straight  gib  head  key 


Square  end.  one  end 
rounded,  or  both  ends 
rounded,  as  may  be 
required. 


no.  6.      STANDARD  DESCRIPTIONS  AND  DEFINITIONS 


26 


PUKCHASING  AND  STORING 


machines.     No  intelligent  prices  could  liave  been  ob- 
tained or  an  order  issued  on  the  basis  of  the  defini- 
tion given  in  the  requisition. 
Another  requisition  was  for: 

10,000  Bolts  and  Nuts  34"x3". 

In  this  case  neither  the  style  of  the  bolt  nor  of  the 
nut  is  specified.  The  nuts  might  be  square  or  hexa- 
gon, hot  pressed  or  cold  punched.  If  bids  were  asked 
on  the  description  given,  the  bidders  would  im- 
mediately ask  what  was  actually  required,  or  would 
send  in  quotations  for  varying  styles  of  nuts  and  the 
prices  would  be  useless  for  purposes  of  comparison. 
The  correct  method  of  specifying  and  which  should 
have  been  employed  in  writing  requisitions  is  as  fol- 
lows : 

10,000 %"x3"  sq.  head  Machine  Bolts  with  C.  P.  R.  hex. 

nuts.,  U.  S.  S. 

This  description  would  be  readily  understood  by 
any  manufacturer  of  bolts  and  nuts.  Its  import  is 
unmistakable  to  any  person  accustomed  to  handling 
this  material.  If  one  wanted  to  be  technical,  the 
specification  could  be  extended  as  follows:  To  be 
made  of  machinery  steel  having  a  tensile  strength  of 
50,000  pounds  per  square  inch;  and  the  nuts  could  be 
further  described  as  cold  punched,  chamfered  and 
trimmed  hexagon  rough  nuts.  But  the  definition  as 
given  above  is  the  regular  commercial  one  and  is 
ample  for  all  ordinary  purposes. 

Another  illustration  is  of  a  requisition  which  read: 

1  Bale  of  Burlap  for  packing  room. 


ROUND 


ROUND  COPPER  WASHERS 


Bolt 
Part  No.  Diam. 


85304 
84761 
80182 
86095 
80490 
80007 
80148 
84762 
84764 
80489 
80149 
80150 
1867 
80158 
80147 
85307 
80185 
80151 
80152 
80153 
80154 
80155 


H 


#6 


#8 
#10 


#12 


125' 

.150" 
^' 

A' 

.170' 
.195' 

A' 
A' 

.215 
.228' 
A' 

y 

\' 


B 
^'' 

ir 

V 

I' 
I' 

tt' 
A' 


4'- 


C  Remarks 

ih'  Standard 

A'  Special 

r 

^'  Standard 

ii'  Special 

it'  Sp.  for  "L"  Push  Button 

ti  Standard 

ih'  Special 

A'  Standard 

iV'  Special 

A*  Contact  disk,  hole  C's'k. 

iV  Special 

A"  " 

A'  Standard 

A'  Contact  Disk 

A'  Special 

A' 


** 


*i 


™.  7.      A  STANDARD  METHOD  OF  INDICATING  THE  PART  NUMBER 

siVdIv  ^^Lvl'nVfh'^"''"?"  department  is  able  to  requisition  articles 

bimpiy  by  givmg  the  part  number.    The  purchasing  department  will 

clearly  understand  what  is  to  be  purchased.  27 


28 


PURCHASING  AND  STORING 


If  a  purchasing  agent  asked  for  prices  on  such  a 
definition  he  would  be  requested  for  information  as  to 
weight  per  foot  and  width.  This  is  one  of  those  in- 
stances where  practical  experience  should  determine 
the  quality  best  suited  for  the  product  that  is  packed 
in  the  shipping  room.  It  is  possible  that  it  may  be 
found  more  economical  to  carry  two  or  more  weights 
in  stock.  In  any  case  the  width  of  the  roll  and  the 
weight  per  yard  should  be  specified. 

The  illustrations  given  could  be  continued  in- 
definitely, but  those  given  will  answer  the  present 
purpose.  It  cannot  be  emphasized  too  strongly  that 
for  intelligent  purchasing  every  article  and  all  ma- 
terial must  be  accurately  and  adequately  described. 
In  doing  this  it  is  preferable  that  definitions  be  brief, 
concise,  and  tersely  worded.  Sometimes  one  or  two 
words  and  figures  are  sufficient.  Nothing  is  gained 
by  adding  anything  to  the  shortest  definition,  pro- 
viding this  definition  conveys  in  unmistakal)le  lan- 
guage what  is  actually  meant.  No  article  is  so  simple 
or  so  common  that  it  should  not  be  properly  and 
clearly  described  or  specified. 

Confusion  is  further  aggravated  by  the  varying 
methods  of  describing  the  same  article.  One  man 
may  give  the  width  first  and  the  length  next,  while 
another  will  reverse  this  order.  Again,  the  addition 
of  a  single  unnecessary  word  might  lead  to  a  com- 
plete misunderstanding,  while,  on  the  other  hand,  the 
omission  of  one  might  even  mean  that  the  descrip- 
tion could  be  used  to  cover  two  articles. 

Purposes  of  Definitions.— The  subject  of  standard 
definitions  has  had  the  serious  consideration  of  many 


DEFINITION  OF  PARTS 


BASE— A  part  used  as  a  foundation,  rest  or  support  for  another  part 
or  parts. 
Apply  a  prefix  to  the  term  indicating  location. 

Specification  should  state:    Quantity,  Name  of  Part,  Material, 
Part  Number. 

Example:    6 — contact  holder  bases,  Brass,  Part  No.  3337. 
1— equalizing  hitch  base,  C.  I.,  Part  No.  6634. 


BEAM— A  part  long  in  proportion  to  its  thickness,  usually  in  a 
horizontal  or  nearly  horizontal  position  and  supported  at  its  end 
or  ends  and  loaded  in  some  manner;  as  a  load  m  the  center,  load 
at  either  end,  or  both  ends,  an  equally  distributed  load,  etc. 
This  term  should  be  used  with  discretion  and  avoided  wherever 
possible. 
Apply  a  prehx  to  the  term  indicating  function. 

Specification  should  state:    Quantity,  Name  of  Part,  Material. 
Pzri  Number. 

Example:    1 — momentum  compound  brake  working  beam.  C.  S., 
Part  No.  5535. 


BEARING — A  part  used  as  a  support  for  and  in  direct  contact  with 
a  moving  part.  The  moving  part  is  usually  a  revolving  one,  as 
a  shaft  journal,  pivot,  pin,  etc.  or  it  may  be  a  part  subject  to 
longitudinal  motion. 

Bearings  for  revolving  parts  should  be  divided  into  three  classes 
viz.  those  in  which  the  pressure  is  perpendicular  to  the  axis  of 
the  shaft,  the  pivot  or  step  bearing  in  which  the  pressure  is 
parallel  to  the  axis  of  the  shaft,  and  the  thrust  bearing  in  which 
the  pressure  is  parallel  with  the  axis  of  the  shaft,  but  is  taken  on 
the  face  of  a  collar  or  other  form  of  bearing  from  the  periphery 
of  the  shaft. 

■    The  last  two  classes  will  be  treated  under  their  proper  headings, 
viz,  "E»ivot  Bearings"  and  "Thrust  Bearings". 
Apply  a  prefix  to  the  term  indicating  location. 

Specification  should  state:    Quantity,  Name  of  Part,  Material, 

Part  Number. 

Example:    1— drum  shaft  bearing.  C.  I..  Part  No.  3126 

2 — ^inside  worm  shaft  bearings,  C.  I.,  Part  No.  6231. 


BED— A  foundation  for  a  machine.    A  rigid  part  of  a  machine  on 
which  something  is  supported  and  to  which  the  working  parts  are 
usually  secured. 
Avoid  the  use  of  this  term,  uang  instead  the  term  "Bed  .Plate." 

BED  PLATE — A  rigid  part  of  a  machine  on  which  something  is  suiv 
ported,  and  to  which  the  working  parts  are  usually  secured, 
bpecification  should-h*-^— — '-— .«jjg^le,  stating:  Quantity 


bevel  gears  where  the) 
plane.    The  term  "*'* 
the  term  "EJevel  (jt* 
to  bevel  gears  whosei 

Specify  bevel  gearsj 
(^ntity,  Name  of 
Pitch  diameter.  Mai 

Example:    1— bevel 
No. 


BLOCK— A  term  us 

to  a  part  more  or  1^ 
or  more  plane  or  ap 
be  used  with  dis 
also  "Pillow  Block.] 
Apply  a  prefix  to  tr 

Specification  should 
Part  Number. 


Example: 


No.  141 
4 — guide  sh^ 
1 — thimble 


BLOWOUT— A  magneuj 
formed  by  the  separatjf 
ing  part  of  a  circuit/ 
function. 

Specification  should 
Part  Number. 

Example:    1 — "C 
Part 
2~"H 
Part 


BOILER— This  term  h 
As  used  by  this  Com 
strong  metallic  vessel 


BOLT— A  strong  pin  of 
head  at  one  end  and 
a  screw  thread  at  the 
are  given  various  nai 
the  general  shape  of  t 
Commercial  bolts  are 
follows: 

and  nuts 


FIG.  8.      DEFINITION  SHEET 

These  sheets  are  extremely  valuable  throughout  any  establishment. 

The  object  is  to  give  clear  definitions  which  may  be  understood 

by  anyone.    See  also  Figure  9. 
2d 


30 


PURCHASING  AND  STORING 


manufacturers,  and  earnest  efforts  have  been  made  tO 
find  a  satisfactory  solution.  Various  schemes  have 
been  tried  out  with  varying  success.  That  it  is  es- 
sential to  have  some  regulated  and  well  ordered 
method  of  standardizing  the  descriptions  of  every 
class  of  material  and  of  all  articles,  and  also  of  all 
supplies  of  every  kind  and  nature  used  around  an 
industrial  plant,  can  not  be  gainsaid.  There  have 
been  more  attempts  to  standardize  material  and  sup- 
plies than  to  standardize  the  use  of  proper  definitions. 
The  purchasing  department  is  more  directly  inter- 
ested in  the  latter  phase.  Both  phases,  unquestion- 
ably, should  be  dealt  with  simultaneously,  but  it  is  not 
always  done. 

The  objects  to  be  attained  by  standardization  are: 

1.  To  indicate  commercial  material  and  articles  to 

be  used  in  production  work  and  to  be  adopted 
as  standard. 

2.  To  reduce  the  variety  of  material  and  articles 

necessary  to  be  carried  in  stock. 

3.  To  reduce  the  variety  of  supplies  used  and  con- 

sumed throughout  the  establishment. 

4.  To  secure  uniformity  in  naming  and  defining  all 

material,  articles,  and  supplies. 

The  illustrations  shown  in  Figures  3  to  10  indicate 
in  what  manner  the  objects  mentioned  have  been  at- 
tained. These  sheets  of  definitions  can  be  printed  if 
there  is  a  large  number  of  users  or  can  be  prepared 
by  the  technical  staff  and  blue  printed  if  then?  is  only 
a  limited  number  of  users. 


DEFINITION  OF  FARTS 


KEY— For  the  definition  of  this  term,  also  method  or  specifying, 
see  #5022  Data  Class. 


KNEE — ^This  term  will  be  understood  as  indicating  a  bracket  which 
connects  two  parts  at  an  angle, 

The  use  of  this  term  should  be  avoided  wherever  possible,  using 
instead  the  terms  bracket,  etc. 
Apply  a  prefix  to  the  term  indicating  location  or  function. 

Specification  should  state:    Quantity,  Name  of  Part,  Material, 
Part  Number. 

Example:    1— brake  band  knee,  W.  I.,  Part  No.  17751. 


KNUCKLE  JOINT— This  term  will  be  understood  as  indicating 
a  hinge  joint,  in  which  a  projection  with  an  eye  on  one  piece, 
enters  a  jaw  between  two  corresponding  projections  with  eyes 
on  another  piece,  and  is  retained  by  a  pin  which  passes  through 
the  eyes  and  forms  the  pivot. 


LAMINATION — Used  as  an  electrical  term  it  will  be  understood 
as  indicating  a  thin  iron  disk  or  plate  used  to  build  up  an  arma- 
ture, field  pole  pieces,  etc. 

The  thin  disks  or  plates  may  or  may  not  be  insulated  from  one 
another 
Apply  a  prefix  to  the  term  indicating  function  or  location. 

Specification  should  state:    Quantity,  Name  of  Part,  Material, 
Part  Nvunber. 

Example:    300— #17-26  Motor  pole  piece  laminations.  Steel, 
#28  (.0156')  U.  S.  Gauge,  Part  No.  30001. 


LATCH — A  movable  piece  which  holds  anything  in  place  by  en- 
tering a  notch  or  cavity. 

The  use  of  this  term  should  be  avoided  wherever  possible,  using 
instead  the  terms  "Catch."  etc. 
Apply  a  prefix  to  the  term  indicating  location. 

Specification  should  state:    Quantity.  Name  of  Part,  Material, 
Part  Number. 

Example:  •  1— switch  arm  latch,  C  S.,  Part  No.  17756. 


LEVER— A  rigid  piece  which  is  capable  of  turning  about  one  pcnnt, 
or  axis,  and  in  which  are  two  or  more  other  points  where  forces 
are  applied  or  dehvered;  used  for  transmitting  and  modifying 
force  and  mot" 

■  AnnlY 


LINK— This  term 
rod  or  piece  for 
necting  rod  with 
be  used  to  indica 
The  term  is  also 
escalator,  the  p: 
also  has  a  rack  c 
Apply  a  prefix  to' 


Specification  shoul 
Part  Number. 

Example:     1- 

1— OF 
1— lir 


LOCKNUT— This 

used  in  pipe  fitting 
where  a  pipe  pas 
or  liquid:  such  as 
is  cut  on  the  pipej 
two  locknuts  are 
on  the  outside  of 
the  side  of  the 
between  the  lockr 
to  make  an  absolul 
The  term  "Locknv 
a  check  nut. 


LOCK  WASHER 

part  or  member 
or  under  a  nut., 
or  to  prevent  a 
For  further  infj 
specifying,  see 
For  dimension; 
For  list  of  st 
#1205  Table  C 


LOOM  BOLT- 

of  the  body  ne 
to  fasten  wood) 
very  similar  to 
larger,  and  the 
Avoid  the  use  of  1^ 

LUG— This  term  will 
anything  is  support^ 
is  fastened.     Any 


FIG.  9.      DEFINITION  SHEET 
These  sheets  familiarize  the  staff  with  various  parts,  and  are  of 
great  value  to  those  in  the  technical  departments  and  of  far  greater 
value  to  those  without  technical  training. 

See  also  Figure  8,  31 


PURCHASING  AND  STORING 


'trffl 


Li^fJ 


1 


OVAL  DOG  OR  PIVOT  CONE 

POINT  POINT  POINT 


DIMENSIONS  OF  PIVOT  POINT  SET  SCREWS. 


I* 
I* 

I' 

IV 

2' 


Diam.  of  Pbint 


A* 

H' 

*• 

»• 

•• 

f 

*' 

r 
I* 
»»• 
If 


Length  of  Point 


A' 


r 


Spedal  don't  UK 


Pivot  points  are  flat  on  the  end  unless  otherwise  specifieo,  and  the  kngth  of  screw  is  measured  from 
extreme  point. 

If  special  shape  or  aize  pivot  point  is  required,  it  must  be  shown  by  drawing  or  sketch,  or 
specified  completely,  the  f<Srmer  preferred. 


FIG.  10.   TABULATION  OF  STANDARD  DIMENSIONS 

Speaking  again  from  the  viewpoint  of  purchasing, 
there  is  one  objection  to  these  sheets  or  books  of 
standard  definitions.  Every  person  authorized  to 
make  requisitions  on  the  purchasing  department  is 
supposed  to  have  a  copy  and  adhere  rigidly  to  the 
standards  adopted  for  naming  and  defining  the  goods 
requisitioned.  But,  unfortunately,  this  is  not  always 
done.  The  books  are  apt  to  be  treated  as  reference 
books,  purely  and  simply,  to  be  consulted  when  in 
doubt.  Confident  in  his  memory  many  a  man  will 
admit  no  doubt  even  when  not  pressed  for  time,  and 


THE  ARTICLE 


33 


will  write  up  a  requisition  incorrectly  or  inade- 
quately. And  when  in  a  hurry,  although  in  doubt,  he 
will  perhaps  not  consult  his  reference  book,  trusting 
to  the  purchasing  department  to  rectify  any  errors 
of  omission  and  commission. 

Therefore,  the  purchasing  department  cannot 
escape  from  the  responsibility  of  correctly  and  ade- 
quately defining  its  purchases.  It  must  check  up  all 
requisitions  before  any  action  is  taken  on  them. 

Standardizing  Definitions  Through  Purchasing.— 
In  those  establishments  where  no  methods  have  been 
adopted  for  securing  standard  definitions  it  devolves 
upon  the  purchasing  department  to  do  something  in 
this  direction,  and  large  results  can  be  accomplished 
if  the  problem  is  approached  in  the  right  manner  and 
grappled  with  in  a  systematic  way. 

Constantly  coming  in  contact  with  manufacturers 
and  vendors,  the  purchasing  staff  is  in  a  peculiarly 
favorable  position  to  become  conversant  with  the 
regular  recognized  standard  commercial  definitions  of 
everything  purchased,  and  it  can  gradually  enforce 
the  use  of  them  in  so  far  as  the  purchasing  and  store- 
keeping  departments  are  concerned. 

It  may  be  contended  that  it  is  not  the  province  of 
the  purchasing  department  to  attempt  to  enforce  the 
standardization  of  materials,  but  it  has  been  known 
to  have  accomplished  much  good  in  this  direction. 

In  the  enforcement  of  a  standard  line  of  supplies 
it  can  well  have  a  freer  hand.  In  those  cases  where 
each  department  or  section  of  an  establishment 
requisitions  its  own  supplies,  it  is  liable  to  be  gov- 
erned by  individual  preferences  and  dislikes,  causing 


ivnnitffii 


ii 


34 


PURCHASING  AND  STORING 


THE  ARTICLE 


35 


a  much  greater  variety  of  articles  to  be  purchased 
than  is  absolutely  necessary.  Elimination  of  this 
fault  can  be  brought  about  by  standardization.  A 
purchasing  agent  recently  said  that  he  found  eighteen 
varieties  of  cotton  waste  were  being  used  in  an 
establishment  when  he  took  charge  of  the  purchas- 
ing; sixteen  of  these  he  soon  found  were  unwarranted. 
This  condition  occurred  in  a  manufacturing  plant,  not 
in  municipal  purchasing.  As  a  result  a  saving  in 
cost  of  forty-five  per  cent  was  effected. 

The   average  buyer  is   commercially   rather  than 
technically  trained;  and  it  is  not  to  be  assumed  that 
a    man    with    these    qualifications,    buying    a    wide 
variety  of  articles,  can  be  so  technically  informed 
that  he  is  able  to  specify  each  one  of  his  purchases 
accurately.    Nevertheless,  he  should  have  some  super- 
ficial knowledge  of  technical  and  mechanical  sul)jects. 
Generally  speaking,  the  man  who  buys  a  sp<jcified 
grade  of  material  in  large  quantities  at  regular  in- 
tervals should  not  suffer  from  a  lack  of  knowledge 
concerning  the  technical  characteristics  of  that  ma- 
terial.   He  will,  from  observation  if  not  sheer  neces- 
sity, acquire  all  points  of  information  needful  to  the 
satisfactory  and  economic  purchase  of  the  commodity. 
Similar  deductions  can  be  made  in  connection  with 
the  purchase  of  supplies,  and   perhaps   they   apply 
with  more  force  because  technical  considerations  are 
not  so  important  nor  so  intricate.     The  uniformity  of 
the  product  of  an  industrial  establishment  depends 
very  largely  on  uniformity  in  the  quality  of  raw  ma- 
terials.   With    supplies    it    is    somewhat    different. 
Utilitarian  considerations  have  more  weight  in  de- 


Specifications  must  2lways  read  as  follows: 
Quantity.  Dia.,  Length  Material  Article 
Example.     1000       '/?'  x    3"     Steel  Cotter  Pins 


Req.  No. 


Order  No 


Date 


Seller 


Quantity 


Size 


Material 


Price 


Delivery 


FIG.  11.  PURCHASE  ORDER  RECORD 
Such  a  purchase-order  record  as  that  illustrated  is  valuable  for  refer- 
ence purposes.  From  it  can  be  abtained :  (a)  A  complete  index  of  all 
orders  under  the  name  of  the  material ;  (b)  a  list  of  all  vendors  from 
whom  the  material  has  been  purchased;  (c)  a  record  of  prices  paid, 
the  fluctuations  being  easily  followed  by  glancing  down  the  last 
column;  (d)  a  compilation  of  the  total  quantity  of  material  pur- 
chased over  any  period;  (e)  a  standardization  of  specifications  and 
definitions.  Whenever  possible,  a  sketch  should  appear  on  the  record, 
but  with  such  things  as  sheet  mica,  sheet  fiber,  cotton  waste,  etc.,  the 
standard  method  of  specifying  should  be  printed  across  the  top  of  the 
page,  e.g,  "100  lb.  clear  North  Carolina  mica  cut  IV2  in.  x  4  in.— 
Sample  for  testing  purposes  must  be  submitted'before 

order  is  placed." 

termining  the  purchase.  And  since  the  purchasing 
agent  has  or  comes  in  contact  with  or  is  offered 
almost  every  known  article  suitable  for  any  kind  of 
purpose,  he  is  in  an  exceptionally  favorable  position 
to  form  an  opinion  and  come  to  a  decision  in  regard 
to  many  of  them. 

Enforcing  Standard  Definitions.— Figures  11  and  12 
show  what  can  be  done  in  the  purchasing  department 
in  the  way  of  enforcing  standard  definitions.  When 
any  requisition  is  received  in  the  purchasinig  depart- 
ment, the  first  thing  to  be  done  in  connection  with  it 


THE  ARTICLE 


37 


is  to  check  it  with  the  standard  definition  as  given  in 
the  records;  and  if  it  is  not  in  accordance  with  the 
definition,  it  must  be  corrected  to  conform  to  it.  In 
later  chapters  the  requisition  will  be  dealt  with  more 
fully.  At  present  it  is  desired  only  to  show  its  con- 
nection with  the  standard  definitions. 

Whenever  possible  a  sketch  should  accompany  the 
definition.  By  the  visualization  of  an  article  every 
time  it  is  ordered  it  becomes  second  nature  to  specify 
correctly.  With  many  articles  sketches  are  unneces- 
sary, and  with  others  impossible;  but  the  standard 
definitions  should  always  be  given.  This  applies  to 
every  purchase,  including  supplies,  such  as  brooms, 
oils,  waste,  packing  materials,  stationery,  carbon 
paper,  ink,  and  so  forth. 

Many  purchasing  agents  rely  solely  on  their 
memories  to  correct  improperly  worded  requisitions, 
long  use  having  accustomed  them  to  the  needs  of  the 
establishment.  Where  a  very  limited  number  of 
articles  are  purchased  it  may  be  feasible  to  specify 
each  item  from  memory  correctly;  but  it  is  not  good 
practice;  it  is  unscientific,  and  it  frequently  leads  to 
mistakes.  Changes  in  materials  and  supplies  are  con- 
tinually taking  place,  and  the  only  safe  and  proper 
way  is  to  make  a  permanent  record  of  them. 

It  is  not  to  be  supposed  that  any  purchasing  agent 
IS  so  well  informed  as  to  be  able  to  describe  correctly 
every  article  purchased.  In  some  establishments  the 
items  needing  definition  would  run  into  thousands; 
but  even  so  the  work  of  accumulating  the  definitions 
IS  not  so  stupendous  as  the  large  number  would  seem 
to  indicate.     The  best  plan  is  to  consult  the  manufac- 


38 


PURCHASING  AND  STORING 


THE  ARTICLE 


39 


turers  and  suppliers  each  time  a  new  material  or 
article  is  ordered,  obtaining  the  correct  standard 
commercial  method  of  specifying  it  and  making  a 
permanent  record  of  it.  By  adopting  this  course  the 
whole  range  of  purchases  can  be  covered  in  a  reason- 
able time.  It  will  certainly  repay  any  buyer  to  put 
a  man  on  this  work  and,  if  necessary,  let  him  devote 
his  whole  time  to  it  until  the  records  are  complete. 

Much  valuable  information  can  also  be  obtained 
from  catalogs.  This  subject  will  be  considered  later 
in  connection  with  the  purchasing  agent's  library,  but 
this  source  should  be  used  to  collect  general  infor- 
mation regarding  any  product,  the  number  of  sizes  in 
>^hich  it  is  made,  and  the  different  styles,  rath(?r  than 
to  secure  the  definition  of  a  particular  item. 

Intended  Use  of  Articles.— Many  articles  have  what 
might  be  called  counterparts  or  prototypes.  When  in 
the  market  for  any  of  these,  the  buyers  are  offered  a 
legion  of  products  which  seem  to  differ  but  slightly 
the  one  from  the  other.  Without  any  knowledge  of 
the  ultimate  use  lor  which  such  an  article  is  intended 
it  is  impossible  to  be  sure  in  what  manner  the  sub- 
stitutes offered  are  unsuitable. 

Unfamiliarity  with  the  manufacturing  procc^sses  of 
the  business  for  which  he  purchases  is  one  of  the 
prevailing  weaknesses  in  the  purchasing  agent 's  pro- 
fession. A  buyer  should  know  enough  about  the  pro- 
duction and  operating  departments  of  his  own  factory 
to  be  able  to  make  a  reliable  decision  as  to  the  utility 
of  any  substitute  that  may  be  offered.  It  is  usually 
through  the  purchasing  department  that  these  alter- 
native articles  and  materials  come  to  light,  and  the 


ability  to  discern  what  to  reject  and  what  to  accept 
is  a  valuable  attribute  in  a  buyer. 

Unless  a  buyer  has  a  good  working  knowledge  of 
the  manufacturing  methods  of  his  own  house  and  its 
product  he  is  at  a  great  disadvantage  in  dealing  with 
salesmen.  The  buyer  interviews  many  salesmen. 
Any  one  of  them,  for  example,  may  handle  only  a 
single  line  or  article  and  in  that  one  field  he  may  be 
an  expert.  He  can  designate  exactly  the  advantages 
of  his  product  in  the  manufacturing  processes  of  the 
concern  to  which  he  is  trying  to  sell,  and  if  the  buyer 
is  not  equally  well  posted  on  the  products  of  his  own 
house,  he  will  not  be  able  to  handle  the  situation  with 
judgment  and  discretion. 

No  matter  what  the  nature  of  the  purchase  there 
are  always  questions  arising  which  can  only  be  an- 
swered by  a  knowledge  of  the  intended  use  of  the 
article,  but  it  is  not  always  possible  for  a  buyer  to 
have  this  close  knowledge  at  first  hand.  In  a  very 
small  business  it  may  be,  but  in  purchasing  for  a 
large  corporation  whose  requirements  embrace  an 
enormous  variety  of  objects,  detailed  information 
must  be  put  into  the  purchasing  agent's  possession. 
And  it  must  be  put  in  such  explicit  shape  that  he  can 
form  his  opinions  and  judgments  on  many  questions 
from  a  paper  standpoint. 

The  illustrations  given  earlier  in  this  chapter  of 
standard  definitions  and  stock  parts  and  their  use  in 
the  product  of  a  factory  are  extremely  valuable  ad- 

• 

]uncts  to  a  purchasing  agent's  knowledge.  Not  only 
do  these  definitions  give  him  information  regarding 
the  product  of  his  own  factory,  but  they  also  give  him 


40  PURCHASING  AND  STORING 

complete  data,  compiled  by  those  who  are  in  a  posi- 
tion to  know,  and  detailed  specifications  of  all  the 
articles  and  materials  he  purchases. 

Samples.— Many  purchasing  agents  maintain  a 
sample  file  with  contents  tagged  and  indexed.  This 
may  be  advisable  where  the  purchasing  is  done  from 
a  central  point  with  storerooms  and  factories  scat- 
tered  in  various  places,  but  there  is  not  much  to  be 
said  in  its  favor  when  the  purchasing,  storekeeping, 
and  production  work  are  all  located  in  one  group  of 

buildings. 

As  a  general  rule  buyers  for  industrial  establish- 
ments do  not  show  any  great  enthusiasm  over  buying 
from  samples.    Sometimes  samples  submitted  by  sev- 
eral bidders  can  be  examined  and  put  to  some  simple 
tests.     This  is  of  assistance  in  foiming  a  decision  on 
the  relative  values  of  the  quotations  and,  furthermore, 
the  sample  can  be  retained  and  compared  with  the 
material  finally  delivered.     This  is  the  most  reUable 
means  of  ascertaining  whether  the  material  finally 
delivered  is  exactly  in  accordance  with  the  sample 
submitted.    If  repeat  orders  are  expected  the  sample 
can  be  filed  for  reference  when  subsequent  purchases 

are  made. 

Buying  to  sample  should  be  confined  to  articles  in 
which  the  chemical  composition  is  unimportant  or 
which  do  not  have  to  pass  any  severe  tests.  But  if 
chemical  composition  is  important  the  only  safe  way 
is  to  specify  the  required  composition  in  the  body  of 
the  order  and  also  to  define  any  analytical  and 
physical  tests  to  which  the  material  will  be  sul)jected. 

In  some  instances  an  article  may  not  be  specified 


THE  ARTICLE 


41 


or  defined  by  the  purchaser,  but  the  onus  is  thrown 
entirely  on  the  seller  to  furnish  material  that  will  per- 
form certain  work  or  fulfill  some  specified  function. 
This  is  frequently  productive  of  good  results,  because 
it  starts  a  lot  of  sellers  working  for  one  buyer  for  one 
particular  purpose,  and  out  of  the  combination  work- 
ing for  him  the  buyer  may  secure  an  exceptionally 
good  bargain. 

Quantity  Purchased. — It  is  not  usually  the  purchas- 
ing agent's  business  to  designate  how  much  shall  be 
bought.  Neither  is  it  the  storekeeper's,  but  this  sub- 
ject wall  be  taken  up  under  the  discussion  of  stores 
handling,  as  it  more  properly  belongs  there. 

If  a  special  order  is  secured  by  the  sales  depart- 
ment of  the  factory  the  amount  of  material  called  for 
by  that  order  is  the  determining  factor.  If  the  ma- 
terial is  one  which  is  carried  in  stock  permanently, 
the  requirements  of  the  business  and  length  of  time 
consumed  in  getting  delivery  must  be  considered. 

The  first  thing  the  purchasing  agent  wants  to 
know  is  what  the  plant  wants;  and  it  is  his  business 
to  secure  what  is  needful  to  keep  the  production  work 
moving  along  in  its  appointed  way.  The  basis  of 
scientific  buying  is  to  have  an  exact  knowledge  of 
these  needs.  They  should  be  stated  so  precisely  in 
specifications  and  requisitions  that  they  cannot  be 
misunderstood  or  evaded. 

The  skilful  buyer  should  endeavor  to  move  in  the 
direction  of  standardizing  his  entire  line  of  purchases. 
Of  course,  all  articles  are  not  subject  to  standardiza- 
tion; but  in  purchasing  for  a  large  corporation  there 
IS  a  big  field  for  it.    This  is  moving  in  the  general 


42 


PURCHASING  AND  STORING 


direction  of  a  permanent  buying  basis,  eliminating 
much  work  and  argument  from  the  seller's  end  of  the 
game.  The  alert  purchasing  agent,  however,  can* 
not  allow  himself  to  settle  back  comfortably  with 
the  feeling  that  standardization  has  made  his  future 
path  entirely  smooth.  The  sciences  that  enter  into 
manufacturing  are  moving  forward  at  a  rapid  rate, 
changing  materials  and  methods,  and  the  purchasing 
agent  must  continually  revise  his  specifications  and 
definitions  to  keep  abreast  of  manufacturing  require- 
ments. 


CHAPTER  III 
THE  SELLER 

Relations  Between  Buyer  and  Seller. — Forming 
proper  business  connections  with  the  seller  is  one  of 
the  most  important  phases  of  purchasing  work.  The 
economic  aspects  of  the  subject  warrant  consideration 
at  this  time. 

In  conducting  electric  current  from  generating 
station  to  the  point  of  consumption  certain  trans- 
mission losses  are  bound  to  occur,  and  electrical  en- 
gineers are  constantly  at  work  endeavoring  to  reduce 
these  losses.  In  the  world  of  business  certain  '*  trans- 
mission losses''  caused  by  lax  and  unscientific 
methods  of  making  connections  between  buyer  and 
seller  also  occur.  Strenuous  efforts  are  being  made  to 
reduce  these  losses,  and  in  these  efforts  the  pur- 
chasing agent  performs  an  important  part.  That  the 
losses  can  be  contracted  and  confined  within  well  de- 
fined limits  is  beyond  question;  the  benefits  derived 
will  be  shared  equally  by  buyer  and  seller. 

The  statement  has  been  made  that,  in  the  last 
analysis,  all  the  complex  ramifications  of  business 
can  be  reduced  to  two  functions — buying  and  selling. 
The  contention  being  that  other  activities,  such  as 
accounting,  financing,  and  advertising,  exist  as  sub- 
flivisions  of  those  two  functions.    Be  this  as  it  may, 

43 


44 


PURCHASING  AND  STORING 


THE  SELLER 


45 


commercial  transactions  do  revolve  around  these  two 
functions,  and  for  economic  reasons  tliey  should  be 
brought  into  the  closest  possible  relationship. 

No  one  would  be  willing  to  admit  that  we  have 
reached  a  condition  where  nothing  more  can  be  done 
to  establish  closer  connections  between  buyer  and 
seller.  It  is  only  necessary  to  review  the  vast  amount 
of  advertising  and  the  strenuous  endeavors  made  in 
all  phases  of  salesmanship  and  compare  them  with 
the  results  obtained,  to  convince  any  skeptic  on  this 
point.  A  rectification  of  these  conditions  cannot  be 
expected  from  the  seller.  He  must  go  after  business 
wherever  prospects  indicate  a  probability  of  obtaining 
it,  and  he  must  go  after  it  in  whatever  manner  seems 
likely  to  secure  results. 

The  buyer  should  be  as  assiduous  as  the  seller.  But 
his  methods  are  necessarily  different,  and  he,  if  his 
purchasing  is  conducted  along  scientific  lines,  can  be 
largely  instrumental  in  reducing  some  of  the  losses. 

When  a  purchaser  buys  any  manufactured  article 
he  is  getting  in  composite  form  all  the  materials 
which  go  to  make  up  that  article.  The  manufacturer 
of  electric  motors,  pumps,  typewriters,  or  loose-leaf 
ledgers  had  to  buy  various  materials  to  produci^  these 
articles,  and  these  materials,  in  turn,  were  the  finished 
product  of  some  antecedent  manufacturing  process. 

This  tracing  back  process  can  be  continued  until 
the  original  raw  material  is  reached.  The  function 
of  buying  is  exercised  many  times  during  this  prog- 
ress, and  if  in  these  movements  its  execution  can  be 
more  economically  administered  and  conducted  it  has 
a  very  appreciable  effect  on  the  ultimate  cost. 


The  economic  benefits  secured  by  the  efficient  op- 
eration of  a  purchasing  department  are  not  confined 
to  the  department  itself  or  to  the  establishment  with 
which  it  is  connected.  There  is  a  much  broader  and 
more  general  view  to  be  taken,  and  one  which  affects 
the  whole  world  of  business  in  its  influence  on  lim- 
iting some  of  the  losses  already  alluded  to. 

Selling  Expense  and  the  Buyer. — A  buyer  should 
have  exact  information  on  all  points  relating  to  the 
material  he  purchases.  He  should  know  exact  quan- 
tities required,  when  required,  and  the  quality  re- 
quired. By  accurate  research  he  can  then  confine  his 
inquiries,  negotiations,  and  orders  to  those  concerns 
who  are  in  the  best  position  to  supply  him.  If  evi- 
dence were  taken  from  business  houses  it  would  al- 
most unanimously  show  that  a  very  large  part  of 
their  correspondence,  telephone  service,  and  sales- 
men's time  is  employed  in  investigating  incorrect  defi- 
nitions and  specifications  of  material.  Many  times 
they  do  not  handle  the  material  that  is  asked  for,  or 
may  be  only  in  a  second  rate  or  second  best  position 
to  supply  it.  And  it  very  frequently  happens  that 
salesmen  are  sent  out  merely  to  clear  up  moot  points, 
traveling  long  distances  on  needless  errands. 

These  expenses  must  be  included  ultimately  in  the 
selling  price  of  the  material  and  articles  affected  and 
are  therefore  paid  for  by  some  buyer.  There  is  no 
good  reason  why  this  condition  should  exist,  because 
a  purchasing  agent  can  so  gather  and  tabulate  the 
necessary  information  that  should  eliminate  a  very 
large  percentage  of  this  wasted  effort.  It  follows 
automatically  that  if  improved  buying  methods  effect 


46 


PURCHASING  AND  STORING 


THE  SELLER 


47 


'i) 


a  saving  in  selling  expenses,  lower  prices  should  even- 
tuate with  some  resultant  benefit  to  the  purchaser. 

Some  proprietary  articles  and  certain  materials 
must  be  bought  in  which  there  is  little  or  no  compe- 
tition, but  outside  of  these  there  is  a  large  field  for 
the  purchasing  agent  to  create  the  competition  he 
wants  by  the  process  of  selection  and  elimination  out- 
lined. A  purchasing  agent  must  get  the  right  kind 
of  competition.  Many  think,  because  they  have  a 
large  number  of  concerns  who  are  prepared  to  quote 
for  their  requirements,  that  they  have  good  competi- 
tion. Nothing  could  be  more  fallacious.  It  is  the 
purchasing  agent  himself  who  should  dictate  with 
whom  he  negotiates  for  prices  and  with  whom  he 
places  orders.  The  consummation  of  every  buying 
transaction  should  be  effected  with  the.  least  amount 
of  expense,  not  only  to  the  two  principals  concerned, 
but  to  all  unsuccessful  bidders. 

It  might  be  assumed  that  a  purchasing  agent  is  not 
interested  in  the  selling  expenses  of  the  houses  from 
whom  he  buys,  but  enough  has  been  said  to  show 
that  he  has  a  very  direct  interest  in  the  cost  of  sell- 
ing. To  further  exemplify  this  let  any  purchasing 
agent  review  the  cost  methods  of  his  own  establish- 
ment. 

A  selling  price  is  arrived  at  by  a  succession  of  steps 
or  stages  commencing  with  raw  materials,  followed 
by  labor,  oyerhead  expense,  selling  expense,  and  to 
these,  finally,  is  added  a  profit.  If  a  purchasing  agent 
studies  this  it  will  be  brought  forcibly  to  his  obser- 
vation  what  an  important  item  selling  costs  are.  With 
this  in  view  he  can  make  some  calculations  as  to  re- 


ductions in  the  prices  of  the  goods  manufactured  by 
his  own  establishment  that  could  be  effected  if  the 
selling  costs  were  considerably  lowered.  And  such  a 
condition  applies  to  every  concern  from  whom  a  pur- 
chasing agent  buys.  If  a  permanent  reduction  can 
be  effected  in  his  own  concern,  a  similar  reduction 
can  also  be  effected  in  others. 

Reducing^  Selling  Costs. — Only  a  few  hints  have 
been  given  as  to  the  manner  of  reducing  selling  costs. 
Later  on,  these  will  be  elaborated  and  some  concrete 
instances  given;  but  at  present  the  following  facts 
should  be  considered.  All  forms  of  entertainment  ad- 
vance the  cost  of  doing  business  and  raise  sales  costs. 
Undoubtedly  this  cannot  be  entirely  eliminated;  some 
expenses  under  this  head  are  necessary,  but  the  buyer 
can  materially  decrease  them.  It  may  be  true  that 
some  salesmen  indulge  their  own  desires  under  the 
cloak  of  entertaining  the  buyer,  but  the  buyer  should 
not  indulge  in  unnecessary  entertainment  for  he  is 
simply  raising  the  price  against  himself. 

If  a  salesman  is  kept  waiting  an  inordinate  length 
of  time  before  interviewing  a  purchasing  agent,  it 
has  a  bearing  on  the  number  of  buyers  he  can  see 
during  the  day  and  therefore  exerts  an  influence  on 
the  selling  cost.  Every  journey  a  salesman  makes  to 
see  a  buyer,  every  call  made  while  negotiations  are 
pending,  every  time  he  submits  new  prints,  every 
time  he  re-figures  certain  quotations,  in  fact  every 
move  he  makes  costs  money  and  thereby  increases 
the  cost  of  selling. 

The  purchasing  agent  can  do  more  than  any  one 
else  to  eliminate  these  waste  movements  and,  further- 


i8 


PURCHASING  AND  STORING 


THE  SELLER 


49 


more,  can  encourage  salesmen  to  work  in  this  direc- 
tion by  furnishing  accurate  and  specific  information 
on  all  points  when  going  into  the  market. 

Segregating  Sellers. — Except  in  a  few  isolat(»d  in- 
stances of  manufactured  products  and  in  a  few  cases 
of  exceptional  commodities  every  manufacturer  and 
dealer  can  be  classified  under  one  of  two  headings. 
He  is  either  as  well  equipped  to  furnish  a  buyer's  ac- 
tual requirements  as  some  other  firm  or  he  is  not.  It 
then  behooves  the  purchaser  to  ask  quotations  only 
from  those  firms  who  are  well  qualified  to  furnish  the 
required  goods. 

By  way  of  illustration  take  the  manufacturers  of 
bolts  and  nuts.  Some  of  them  confine  their  output 
to  certain  types;  others  specialize  on  small  sizes; 
again,  some  make  only  finished  bolts  and  milled  nuts. 
In  ordinary  practice  the  purchasing  agent,  in  obtain- 
ing quotations,  approaches  these  manufacturers  in  a 
hit-or-miss  or  haphazard  manner.  Probably  he  has  a 
list  of  manufacturers  or  obtains  the  names  from  a 
classified  directory,  hoping  by  getting  in  touch  witli 
all  to  hit  the  one  who  can  give  him  the  best  price  and 
delivery.  He  may  or  may  not  succeed.  Even  if  he 
does,  his  methods  are  unscientific,  and  he  has  in- 
creased the  selling  costs  of  many  of  them  unneces- 
sarily. 

Illustrations  analagous  to  the  one  given  could  be 
continued  indefinitely.  Dealers  in  lumber,  manufac- 
turers of  chemicals,  of  stampings,  of  forgings,  are 
all  susceptible  to  a  more  rigid  classification  than  is 
given  in  any  business  directory  or  index.  The  author 
has  seen  requests  for  quotations  sent  to  many  lists 


of  manufacturers  and  suppliers,  and  frequently  not 
more  than  twenty  or  twenty-five  per  cent  of  the  re- 
plies received  could  be  used  for  competitive  purposes. 
With  a  properly  authenticated  list,  however,  every 
inquiry  sent  out  should  bring  a  bona  fide  quotation. 

Genuine  Competition. — Every  quotation  received 
from  sellers  not  in  the  best  position  to  supply  a  pur- 
chaser's requirements  is  not  only  an  economic  loss  but 
furthermore  is  not  genuine  competition.  One  might 
get  a  dozen  such  quotations  and  still  not  have  ob- 
tained good  competitive  prices.  Genuine  and  re- 
liable competition  can  only  be  secured  from  a  prop- 
erly selected  list  of  bidders.  Prices  obtained  in  a 
promiscuous  manner  cannot  be  used  for  comparative 
purposes  with  any  assurance  that  the  best  results 
have  been  secured. 

Sound  competition  can  only  exist  between  those 
parties  who  are  best  equipped  to  supply  the  particu- 
lar grade  or  quality  needed.  This  is  the  right  kind 
of  competition,  and  anything  short  of  this  entails  eco- 
nomic losses  in  the  operations  of  all  those  asked  to 
quote  for  the  business.  To  illustrate  this  again,  con- 
sider a  list  of  spring  manufacturers.  It  will  be  found 
on  close  analysis  that  some  of  them  make  only  heavy 
helical  springs,  others  make  springs  of  light  .w^ire, 
while  others,  still,  are  specialists  in  elliptical  springs 
or  springs  of  formed,  stamped,  flat-strip  steel.  Lum- 
ber dealers  can  also  be  subdivided  into  those  who  spe- 
cialize in  hardwoods,  high-grade  lumber  for  cabinet 
work,  or  rough  lumber  for  mill  construction  or  pack- 
ing purposes. 

These  distinctions  and  refinements  cannot  be  disre- 


^^ 


50 


PURCHASING  AND  STORING 


THE  SELLER 


51 


garded,  and  it  is  incumbent  on  the  buyer  to  confine 
his  activities  in  canvassing  the  market  to  those  con- 
cerns whom  he  has  previously  investigated  along  the 
lines  suggested.  By  this  procedure  only  can  dei)end- 
able  quotations  and  genuine  competition  be  obtained. 

In  considering  the  economic  situation  in  its  relation 
to  competition  it  must  be  borne  in  mind  that  if,  by 
keen  competition  or  clever  maneuvering,  a  buyer 
closes  a  deal  which  entails  a  loss  to  the  seller  it  is  not 
a  loss  to  the  world  of  business.  What  is  lost  by  one 
party  is  gained  by  the  other;  the  general  commercial 
economic  system  has  suffered  no  loss,  as  it  has  in 
cases  where  unnecessary  movements  have  been  caused 
by  unscientific  buying  methods. 

Losses  Through  Incorrect  Definitions.— In  the  pre- 
ceding chapter  stress  was  laid  on  the  importance  of 
correctly  specifying  and  defining  every  article  and  all 
material.  No  matter  how  trivial  or  infinitesimal  a 
purchase  may  seem  it  is  necessary  to  describe  it  so 
carefully  that  no  doubt  whatever  can  possibly  exist 
as  to  size,  quality,  and  quantity.  The  reasons  for  this 
are  the  same  as  those  already  given  for  properly  se- 
lecting the  right  sources  of  supply;  for  otherwise 
similar  losses  would  occur.  If  negotiations  were 
opened  with  only  those  concerns  })est  equipped  to 
supply  the  material,  and  then  it  was  incorrectly  or  in- 
adequately described,  the  situation  would  be  just  as 
bad  as  though  the  material  were  correctly  defined 
and  an  uncertified  list  of  vendors  were  approached. 

It  is  quite  as  important  to  define  an  article  of  small 
intrinsic  value  correctly  as  it  is  the  more  valuable 
ones.     Probably  more  so,  because  the  proportionate 


loss  is  greater.  Instances  have  occurred  where  orders 
were  sent  out  for  very  small  articles  whose  value  did 
not  exceed  fifty  cents,  but  because  of  improper  de- 
scription a  whole  chain  of  inquiries  was  required  to 
clear  up  ambiguous  meanings,  involving  an  expense 
far  in  excess  of  the  value  of  the  articles. 

Departmental  Losses. — So  far,  in  the  discussion  of 
the  economics  of  purchasing,  we  have  confined  our 
attention  to  the  effects  on  business  in  general  and  to 
the  effects  through  reaction  on  the  buyer.  But  the 
economical  operation  of  the  purchasing  department  it- 
self is  also  affected.  Unfortunately,  in  too  many  pur- 
chasing departments  the  employees  must  spend  con- 
siderable time  in  straightening  out  tangles  arising 
from  just  the  causes  previously  referred  to.  It  seems 
to  be  looked  upon  as  a  part  of  the  daily  routine  work 
which  cannot  be  remedied.  But  this  should  not  be  the 
case,  for  this  unpleasant  feature  can  be  greatly  im- 
proved, if  not  entirely  eliminated. 

Proceeding  along  the  lines  laid  down  means  the 
cutting  out  of  all  the  unnecessary  work  of  answering 
inquiries  regarding  incomplete,  inadequate,  or  incor- 
rect specifications;  and  when  the  business  is  placed 
with  selected  firms  the  work  of  following  up  the  order 
and  getting  delivery  is  greatly  facilitated,  for  they 
will  have  been  chosen  for  their  promptness  in  ship- 
ping and  filling  orders  and  their  general  service  and 
attention.  This  means  that  shipping  notices  and  bills 
of  lading  will  be  rendered  promptly,  enabling  early 
advices  to  be  given  to  the  consignee  department; 
and,  what  is  perhaps  most  important,  invoices  will 
^ome  in  quickly  and  regularly.     This  latter  feature 


52 


PURCHASING  AND  STORING 


THE  SELLER 


53 


is  one  that  is  essential  if  all  invoices  are  to  be  put 
through  their  regular  routine  in  time  for  the  cash 
discount  to  be  available. 

Where  a  very  limited  number  of  articles  is  pur- 
chased the  purchasing  department  should  work  at  an 
efficiency  of  one  hundred  per  cent  in  getting  competi- 
tive bids.  This  percentage  cannot  always  be  main- 
tained where  large  numbers  of  articles  are  bought, 
nor  where  new  kinds  of  material  are  continually  being 
required,  but  something  very  near  it  can  be  secured. 
The  Market.— There  is  a  logical  market  for  any- 
thing and  everything  which  it  is  necessary  to  pur- 
chase. It  is  incumbent  on  the  purchaser,  therefore, 
to  confine  his  activities  to  those  houses  who  can  sup- 
ply exactly  what  he  wants.  Experienced  purchasing 
agents  with  proper  records  have  no  difficulty  in  this 
respect,  but  inexperienced  ones  can  secure  equal  effi- 
ciency by  following  closely  the  instructions  given  later 
in  this  chapter. 

The  sources  of  supply  may  sometimes  be  very  large, 
and  the  reverse  may  be  the  case  with  certain  ma- 
terials. But  even  when  one  has  a  large  number  of 
vendors  to  depend  upon  for  a  specific  article  it  will 
alw^ays  be  found  that  some  are  not  in  the  logical  list. 

As  a  measure  of  safety  and  preparedness  for  even- 
tualities a  buyer  should  develop  emergency  markets 
from  which  he  can  draw  whenever  the  occasion  de- 
mands. It  is  the  purchasing  agent  who  is  responsible* 
for  maintaining  a  sufficiency  of  raw  material  for  pro- 
duction work.  Business  acumen  and  foresight  call  for 
him  to  make  provision  for  this  in  his  scheme  of 
buying. 


Many  causes  may  force  the  buyer  out  of  the  logical 
field  in  order  to  keep  his  factory  running.  Strikes, 
breakdowns,  stoppage  of  transportation  facilities, 
freight  embargoes,  and  other  causes  contribute  to  this. 
Sometimes  certain  artificial  conditions  may  exist  by 
reason  of  which  the  logical  source  of  supply  does  not 
offer  the  greatest  attraction  to  the  buyer.  A  depres- 
sion in  trade  in  another  territory  may  make  an  open- 
ing for  a  good  buy,  or  a  combination  working  to  the 
detriment  of  the  consumer  may  be  in  effect  among 
the  regular  sources  of  supply. 

During  an  unprecedented  demand  for  screw  ma- 
chine products  because  of  war  conditions,  the  waiter 
had  an  experience  which  will  serve  as  an  example  for 
the  necessity  for  emergency  markets.  A  small  milled 
article  had  been  bought  in  large  quantities  for  a  num- 
ber of  years,  always  within  a  radius  of  two  hundred 
miles  of  the  buyer's  factory.  Owing  to  the  regular 
sources  of  supply  having  a  surfeit  of  other  orders,  it 
was  impossible  to  place  with  them  further  orders  for 
this  particular  article  except  at  an  advance  of  nearly 
forty  per  cent  and  on  six  months'  delivery.  Some 
difficulty  was  experienced  in  locating  another  source, 
but  finally  a  supply  was  found  which,  although  it  was 
some  twelve  hundred  miles  from  the  buyer's  factory, 
furnished  exceptionally  good  delivery  and  at  a  price 
only  eighteen  per  cent  over  the  old  price. 

Creating  Markets.— Constructive  buying  is  not  a 
fancy  phrase,  it  is  a  reality.  Lack  of  sound  competi- 
tion, poor  sources  of  supply,  and  sources  located  at 
inconvenient  or  distant  points  have  brought  forcibly 
to  the  attention  of  many  buyers  the  advisability,  if 


;  I  1 


54 


PURCHASING  AND  STORING 


THE  SELLER 


55 


not  the  necessity,  of  creating  and  developing  new 
markets. 

It  has  already  been  emphasized  that  potential  com 
petition  is  essential  to  good  buying.    When  competi 
tion  is  weak  or  indifferent,  it  is  time  for  the  purchas- 
ing  agent  to  get  active  and  find  a  solution.     Some 
times  one  or  two  big  concerns  may  so  overshadow  the 
market  as  practically  to  eliminate  genuine  competi- 
tion. 

These  and  other  reasons  make  it  necessary  for  the 
purchasing  agent  to  use  vision  and  imagination,  and 
by  careful  selection  of  likely  sources  to  build  them  uj) 
by  a  process  of  nurturing  and  fostering  until  he  has 
created  a  situation  that  has  all  th(^  elements  he  needs 
for  the  efficient  execution  of  his  policies. 

This  development  work,  when  applied  to  some  of 
the  smaller  and  weaker  concerns,  may  call  for  strategy 
and  tactics  of  a  high  order,  for  the  buyer's  diplomatic 
moves  made  to  accomplish  his  purposes  must  not  be 
disclosed  either  to  a  strong  concern  from  whom  he  is 
buying,  or  to  the  weak  one  which  he  is  trying  to 
make  strong  in  some  particular  line. 

Important  results  have  been  achieved  along  these 
lines.  One  of  the  principal  reasons  for  this  is  that  the 
small  man  is  having  his  selling  done  by  the  purcliaser. 
His  selling  expenses,  then,  are  negligible,  and  gener- 
ally his  overhead  charges  will  be  nmch  lower  than  hi;^ 
big  competitor.  Quite  often  when  the  financial  re- 
sources of  the  small  concern  are  limited  the  buyer  can 
arrange  to  purchase  his  raw  material  for  him  at  lower 
prices  than  his  cramped  financial  condition  will  per- 
mit.   Such  methods  as  these  not  only  enable  the  pur- 


chasing agent  to  buy  at  exceptionally  low  prices  but 
give  him  the  assurance  of  a  reliable  source  of  supply. 
When  a  salesman  discovers  a  ** prospect"  he  assidu- 
ously follows  it  up,  nurses  it,  and  endeavors  to  con- 
vert it  into  a  customer.  It  is  equally  essential  for 
the  buyer  to  discover  '* prospects,"  follow  them  up, 
cultivate  their  potentialities,  and  make  of  them  im- 
portant economic  factors  in  his  general  scheme  of 
business. 

Other  advantages  crop  out  in  developing  the  pos- 
sibilities of  smaller  concerns.  For  example,  it  is 
profitable  at  times  to  bring  to  the  understanding  of 
the  bigger  concerns  that  they  do  not  enjoy  the  mon- 
opoly they  figured  was  theirs.  In  such  cases,  where 
the  visible  supply  of  an  article  may  seem  to  be  al- 
most wholly  in  their  hands,  the  psychological  effect 
may  stimulate  them  into  actions  which  can  only  have 
beneficial  results  for  the  buyers. 

Over-systemization.— Some  large  corporations  have 
carried  departmental  formation  to  such  extremes  that 
su|)sidiary  departments  or  divisions  are  formed  in 
oach  original  department,  and  even  in  these  subsidiary 
<livisions  the  •  work  may  be  divided  into  several 
branches.  Whether  the  multiplicity  of  segregations 
IS  responsible  or  whether  it  is  because  of  lack  of  co- 
ordination or  co-operation  the  writer  does  not  know, 
but  many  experiences  in  buying  from  such  corpora- 
tions has  amply  proved  that  better  service  can  be 
obtained  elsewhere. 

Generally  it  is  fairly  easy  to  get  a  quotation  on  new 
standard  material  from  these  over-systematized  or- 
ganizations,   although    there    are    exceptions.      The 


56 


PURCHASING  AND  STORING 


THE  SELLER 


57 


scheme  of  organization  seems  to  have  provided  for  this 
work  to  be  done  promptly.  But  if  it  is  necessary  to  in- 
quire about  a  shipment  of  some  order,  particularly  if 
it  should  be  a  spare  part  for  a  machine,  or  to  get  a  (luo- 
tation  on  such  an  article,  or  information  on  anything 
but  a  big  order,  the  inquiry  is  often  times  referred  to 
several  persons  before  a  satisfactory  answer  is  ob- 
tained. 

The  writer  has  no  intention  of  ** blacklisting"  large 
corporations.  He  is  simply  recording  that  such  con- 
ditions exist  with  many  of  them,  and  to  a  much  larger 
extent  than  with  smaller  concerns.  It  is  by  no  means 
unusual,  for  example,  to  be  able  to  telephone  to  a 
moderate-sized  firm  and  get  information  promptly  and 
accurately;  while  all  too  frequently  in  dealing  with  a 
large  company  one  is  switched  by  the  telephone  oper- 
ator to  several  persons,  and  then  is  finally  asked  to 
put  the  request  in  writing  and  send  it  as  a  formal  in- 
quiry. This  inquiry,  then,  will  pro})ably  pass  through 
the  hands  of  half  a  dozen  persons  before  an  answer  is 
made,  each  handling  averaging  a  delay  of  a  day.  >^t- 
urally,  it  does  not  take  many  such  experiene(\s  to 
cause  a  purchasing  agent  to  eliminate  such  corpora- 
tions from  his  list  of  sources  of  supply. 

Jobbers. — Every  buyer  prefers  to  place  his  order 
with  the  actual  producer  and  not  through  the  inter- 
mediary jobber.  Not  infrequently,  however,  it  will 
be  found  that  better  service  can  be  obtained  from  a 
jobber  than  from  a  manufacturer.  This  is  a  ques- 
tion of  considerable  magnitude  and  can  be  discussed 
from  many  angles.  Price,  of  course,  is  the  predomi- 
nant argument  and  will  be  discussed  more  fully  else- 


where. The  buyer  should  include  some  jobbers  in 
his  available  sources  of  supply  and  should,  by  all 
means,  retain  their  good  will.  Such  jobbers  as  he 
may  keep  on  his  list  will  depend  largely  on  what  he 
is  buying,  for  he  will  be  compelled  to  purchase  some 
articles  through  these  sources.  The  manufacturer's 
selling  policy  of  protection  usually  enforces  this. 

Again  many  manufacturers  will  sell  direct  to  the 
consumer  in  picayune  quantities.  A  manufacturer 
of  machine  screws,  for  instance,  will  take  orders  for 
one  gross  and  ship  direct  to  the  user.  But  is  the 
buyer  gaining  in  service?  The  screws  no  doubt 
could  be  purchased  from  a  local  jobber  and  be  deliv- 
ered at  the  buyer's  storeroom  at  a  price  little  above 
the  manufacturer's;  while  in  sending  the  order  direct 
to  the  manufacturer,  located  probably  in  a  distant 
city,  shipment  may  not  be  made  at  once  and  corre- 
spondence regarding  it  may  arise;  transportation 
charges  also  may  have  to  be  paid  by  the  purchaser. 
The  inconveniences  connected  with  buying  small 
quantities  at  some  distance  from  the  destination  of 
the  goods  are  all  the  purchaser's  and  not  the  seller's. 

Manufacturers  cannot  carry  stocks  in  every  city. 
The  jobbers  do  this  for  them,  and  hence  they  have  a 
practical  and  legitimate  place  in  the  business  world. 
Buyers  are  absolutely  dependent  on  them  for  **pick 
up"  orders,  for  example,  and  many  times  for  ''rush" 
orders. 

Sources  of  Supply.— Another  reason  why  the  pur- 
chasing agent  must  keep  a  complete  compendium  of 
firms  and  localities  where  he  can  buy  any  material 
likely  to  be  required  by  the  plant,  is  that  he  may  be 


iY 


58 


PURCHASING  AND  STORING 


called  into  fonsiiltation  at  any  moment  on  negotia- 
tions the  sales  department  may  have  in  hand  tor 
some  big  contract,  and  information  will  be  required 
of  him  promptly  and  definitely  as  to  where,  when, 
and  at  what  price  the  raw  material  can  be  secured. 
These  particulars  are  essential,  for  the  sales  depart- 
ment needs  them  to  determine  on  what  basis  to  make 
its  proposal  to  the  customer. 

Both  the  sales  and  production  de})artments  are  apt 
to  overlook  the  possibilities  of  securing  certain 
classes  of  raw  material  promptly;  and  without  duly 
considering  this  phase  they  will  frequently  make 
concessions  to  secure  an  order  which  ultimately  may 
prove  very  costly.  Steel  and  copper,  for  instance, 
may  have  to  be  purchased  from  warehouse  instead 
of  from  mill  to  meet  delivery  dates;  and  the  addi- 
tional cost  thus  incurred  should  have  been  included 
in  the  sales  estimate. 

Selection  of  sources  of  supply  is  not  done  by  in- 
tuition. It  is  a  scientific  process  of  accumulating 
data  and  recording  them  in  orderly  and  proper  shape 
so  that  the  best  source  can  be  chosen  at  a  momiMit's 
notice.  Delivery  conditions  from  the  selected  source 
must  be  known,  and  variations  in  the  time  required 
to  obtain  raw  material  must  be  noted.  Advices  cov- 
ering this  point  should  be  sent  as  occasion  demands 
to  the  manufacturing  department  to  govern  them  in 
making  their  requisitions. 

Records  of  Sources. — Indiscriminate  shopping  and 
marketing  is  inexcusable.  All  the  reasons  previ- 
ously given  and  many  others  as  well  apply  against 
a  vague  haphazard  method  of  procedure  in  placing 


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60 


PURCHASING  AND  STORING 


THE  SELLER 


61 


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orders  without  first  investigating  tlie  recipient.  All 
phases  of  the  transaction  must  be  foreseen  during 
this  investigation  up  to  final  termination  of  the  con- 
tract by  payment  of  the  invoice. 

A  manner  in  which  this  information  can  be  col- 
lected, accumulated,  and  tabulated  is  shown  by  Fig- 
ure 13.  The  necessary  data  can  be  obtained  through 
a  great  many  avenues,  some  of  which  are  enumerated 
in  the  following  list: 

1.  Through  experience  in  dealing  with  vendors  and 
salesmen.  Naturally  one  does  not  take  all  state- 
ments made  by  salesmen  at  their  face  value,  but 
much  useful  information  can  be  obtained. 

2.  By  inquiries  among  firms  in  lines  which  are  some- 
what similar.  This  is  probably  the  most  depend- 
able method  and  can  be  used  with  confidence.  If, 
for  instance,  one  has  a  good  reliable  sourc(»  of 
supply  for  cold  drawn  steel,  through  this  cone<irn 
he  could  no  doubt  easily  obtain  information  re- 
garding manufacturers  or  dealers  in  tempered 
steel. 

Through  friendship  with  business  men  in  all  lines. 
From  catalogues.  This  source  will  be  dealt  with 
fully  in  a  later  chapter. 

From  observations  made  when  visiting  ware- 
houses and  factories.  A  buyer  should  always 
make  a  practice  of  making  such  visits  at  conven- 
ient intervals.  Considerable  knowledge  of  ma- 
terials can  be  acquired  at  these  times,  and  valu- 
able information  regarding  manufacturing  meth- 
ods.    Also  the  arrangement  of  stock  should   be 


3. 
4. 


5. 


noted  and  calculations  made  as  to  whether  it  is 
adequate.  Visits  are  often  requested  by  sellers  as 
a  means  of  assuring  the  purchaser  of  their  capa- 
bility to  take  care  of  prospective  business;  or,  a 
purchaser  may  insist  on  inspection  of  facilities 
before  opening  up  business  relations. 

6.  By  scrutinizing  the  advertisements  in  technical 
journals,  periodicals,  or  trade  papers.  Many  good 
names  can  be  culled  from  these  and  made  the 
subject  of  closer  investigation. 

7.  Keference  to  standard  registers,  such  as  Hend- 
rick's  or  Thomas's,  is  constantly  necessary,  but  it 
is  often  essential  to  sift  the  names  there  listed 
and  further  subdivide  and  classify  them  for  one's 
particular  purpose,  as  explained  earlier  in  this 
chapter. 

8.  From  classified  directories  such  as  the  New  York 
Telephone  Company's  **Eed  Book." 

9.  By  membership  in  a  local  purchasing  agents'  as- 
sociation. 

10.  By  membership  in  or  inquiries  made  through  the 
local  Board  of  Trade  or  Chamber  of  Commerce. 

Purpose  of  Records.— The  information  obtained 
through  the  above-named  channels  is  desired  for  the 
following  purposes: 

1.  To  ascertain  the  position  of  the  concern  to  insure 
satisfactory  competition. 

2.  To  discover  whether  any  combination  or  collusion 
exists  with  other  firms  to  maintain  prices  that 
would  prevent  genuine  competitive  bids. 


62 


PURCHASING  AND  STORING 


THE  SELLER 


63 


3.  To  find  out  the  location  of  the  factory.  One 
might  buy  from  a  jobber  in  Chicago,  but  actually 
the  article  might  be  manufactured  in  Connecticut. 
Such  geographical  considerations  are  often  im- 
portant. 

4.  To  know  the  capacity  of  the  factory.  It  is  essen- 
tial to  know  that  the  manufactory  is  able  to  take 
care  of  the  business  one  gives  them. 

5.  To  obtain  the  reputation  of  the  concern  under  in- 
vestigation for  making  prompt  shipments. 

6.  To  learn  the  transportation  facilities  between 
point  of  shipment  and  destination.  It  is  never 
wise  to  be  dependent  on  one  transportation  line, 
or  to  take  too  big  a  risk  of  freight  embargoes. 

7.  To  make  sure  that  the  stock  is  adequate  and  well 
kept  in  the  case  of  dealing  with  a  warehouse,  or, 
if  with  a  factory,  that  there  is  an  ample  supply 
of  raw  material?  It  is  a  comm<m  experience  to 
place  orders  witli  some  factory  and  not  to  be  able 
to  get  shipment  because  the  factory  cannot  ob- 
tain its  raw  material. 

8.  To  see  that  the  vendor  can  supply  the  quality  de- 
manded. 

9.  To  learn  whether  the  vendor  keeps  his  promises. 
If  a  firm's  reputation  is  bad  in  this  regard,  the 
buyer  will  have  endless  trouble. 

10.  To  ascertain  the  financial  standing  of  the  vendor. 
His  position  must  be  strong  enough  to  insure  that 
his  business  will  move  along  its  appointed  way 
without  let  or  hinderanee.  Buyers  must  have  this 
protection. 


Recapitulation.— Briefly  recapitulated  in  tabloid 
form  the  advantage  and  benefits  gained  by  the 
buyer  by  a  close  adherence  to  a  properly  selected  list 
of  sources  of  supply  are: 

1.  Savings  to  business  in  general  through  reduction 
in  selling  costs; 

2.  Increased  efficiency  of  purchasing  department; 

3.  Protection  against  high  prices; 

4.  Assurance  of  sound,  genuine  competition; 
5    Confidence  in  getting  a  square  deal; 

6.  Provision   against   irregular    and    delayed   deliv- 
eries ; 

7.  Relieving  and  facilitating  follow-up  work; 

8.  Prompt  receipt  of  invoices; 

9.  Acceleration  in  the  work  of  checking  and  approv- 
ing invoices; 

10.  Guarantee  of  all  cash  discounts. 

Unlike  specifications  and  stipulations  regarding 
quantities  to  be  bought,  which  are  not  always  within 
the  jurisdiction  of  the  purchasing  agent,  the  question 
as  to  where  to  buy  is  entirely  and  absolutely  under 
liis  command  and  control.  His  job  is  to  find  the 
market;  and  he  can  make  large  use  of  his  supreme 
authority  in  this  particular  matter  with  JDenefit  to  his 
concern.  His  hands  should  be  free,  and  his  negotia- 
tions unrestricted  by  any  questions  of  reciprocity, 
favoritism,  or  prejudice. 


i 


THE  PRICE 


65 


I 


CHAPTER  IV 
THE  PRICE 

Price  Versus  Value. — Price  in  its  common  mean- 
ing and  narrower  sense  is  the  amount  of  money  fixed 
as  the  consideration  of  the  transfer  of  property;  but 
in  a  broader  sense  it  means  what  one  gives  or  re- 
ceives in  exchange  for  what  is  received  or  given. 
This  view  is  one  which  can  be  studied  to  advantage 
bv  all  buvers. 

A  vendor  may  sell  a  machine  or  certain  material 
for  a  stipulated  consideration  represented  in  dollars 
and  cents;  but  he  may  give  such  excellent  service 
and  even  technical  advice  and  assistance  that,  al- 
though the  actual  cash  paid  may  be  higher  than  sim- 
ilar property  could  have  been  purchased  for  from 
another,  the  value  received  may  be  greater.  The 
reverse  of  this  occurs  when  the  buyer  and  seller 
mutually  arrange  a  monetary  consideration;  the  buyer 
pays  it  as  the  agreed  price,  but  he  may  have  to  spend 
time  and  money  following  up  delivery  and  getting 
possession  of  his  property.  In  that  case  the  real 
price  paid  is  something  more  than  the  actual  casb 
which  is  transferred. 

John  Ruskin  said: 

All  works  of  quality  must  bear  a  prior  in  proportion  to  the 

64 


skill,  time,  expense  and  risk  attending  their  invention  and 
manufaeture.  Those  things  called  dear  are,  when  justly  esti- 
mated, the  cheapest.  They  are  attended  with  much  less  profit 
to  the  artist  than  those  which  everybody  calls  cheap.  Beauti- 
ful forms  and  compositions  are  not  made  by  chance,  nor  can 
they  ever,  in  any  material,  be  made  at  small  expense.  A  com- 
position for  cheapness  and  not  for  excellence  of  workmanship 
is  the  most  frequent  and  certain  cause  of  the  rapid  decay  and 
entire  destruction  of  arts  and  manufactures. 

Price,  quality,  and  service  must  be  considered  to- 
gether. Too  often  price  is  made  the  determining 
factor  in  the  transaction.  Right  buying  demands 
something  more  than  a  comparison  and  scrutiny  of 
prices,  for  in  industrial  management  price  is  some- 
times a  secondary  consideration,  although  it  should 
never  be  ignored. 

Let  us  consider  for  the  moment  the  other  two  fac- 
tors. In  Chapter  II  it  was  explained  that  practically 
all  material  used  in  a  modern  factory  for  production 
work  must  meet  certain  conditions  as  to  quality.  As 
far  as  the  purchasing  department  is  concerned  no 
deviation  can  be  made  in  the  quality  of  the  material 
so  specified.  Engineering  tests  and  exhaustive  ex- 
periments have  predetermined  the  exact  nature, 
style,  grade,  and,  probably,  size  of  the  material,  and 
it  is  the  province  of  the  purchasing  agent  to  buy  that 
material  at  the  lowest  price  from  the  best  available 
sources.  Variations  in  quality  or  substitutions  can- 
not be  permitted  without  the  consent  of  the  author- 
ity in  charge  of  production.  If  a  purchasing  agent 
were  able  to  abrogate  this  feature  the  work  of  the 
technical  staff  and  the  expense  incurred  in  making 
the  tests  and  experiments  would  be  completely  nulli- 
fied. 


66 


PURCHASING  AND  STORING 


THE  PRICE 


67 


1 


I 


Somewhat  different  conditions  surround  the  buy- 
ing of  supplies,  and  usually  the  buyer  has  more  free- 
dom and  some  voice  in  selecting  quality.  This  is 
because  the  supplies  used  in  a  manufacturing  estab- 
lishment are  not  a  component  part  of  the  finished 
product.  The  reputation  of  a  concern  depends  largely 
on  the  uniform  and  sustained  quality  of  the  goods 
turned  out,  and  the  raw  material  purchased  for  these 
goods  must  not  vary.  But  with  supplies  the  purchas- 
ing department  can  frequently  be  of  great  service  in 
bringing  into  use  certain  supplies,  small  tools,  and 
similar  articles  which  might  never  come  under  the 
notice  of  the  shop. 

In  making  purchases,  therefore,  of  raw  material 
whose  quality  has  been  predetermined  and  is  not 
under  his  control  the  buyer  is  confined  largely  to 
specializing  on  price  and  service.  Regarding  the  lat- 
ter, general  information  should  alr(»ady  be  on  record, 
as  explained  in  the  preceding  chapter;  but  special 
conditions  in  connection  with  a  })urchase  may  need 
special  investigation,  and  the  purchasing  agent  must 
know  he  can  get  delivery  at  the  times  required  by 
the  production  department.  Tliese  considerations 
must  be  borne  in  mind  in  forming  any  opinion  on 
prices  quoted.  With  several  bidders  on  equal  terms 
as  regards  service  and  delivery,  price  only  remains 
as  the  deciding  factor  and  the  buyer  must  then  con- 
centrate on  this. 

When  quality  is  left  in  the  purchasing  agent's 
hands  for  determination,  his  responsibility  is  much 
greater.  The  exact  measure  of  utilitv  is  the  vahn' 
of  an  article.     Highest  quality  does  not  necessarily 


mean  greatest  value  to  the  user.  An  article  or  some 
material  which  is  graded  higher  than  the  actual  con- 
ditions demand,  might  not  be  as  serviceable  for  the 
purpose  as  one  of  a  lower  grade. 

Empowered  to  decide  questions  of  quality  the  pur- 
chasing agent  must  weigh  the  merits  of  hosts  of 
substitutes  which  are  constantly  being  brought  to  his 
attention.  The  tendency  with  many  buyers  is  to  re- 
fuse to  consider  substitutions  which  would  involve 
paying  a  higher  price,  but  this  is  a  narrow  view 
to  take.  To  deal  intelligently  with  the  question  of 
quality,  comparing  the  intrinsic  values  of  substitutes 
offered,  and  finally  deciding  which  is  the  best  price, 
presupposes  that  the  purchasing  agent  has  an  inti- 
mate knowledge  of  the  uses  of  the  material  in  his  own 
plant  and  a  wide  knowledge  of  the  many  variations 
of  materials  he  is  buying.  Purchasing  for  an  estab- 
lishment with  a  limited  product  may  be  done  on 
these  lines,  but  beyond  a  certain  point  it  is  an  im- 
possibility, and  the  buyer  has  mainly  to  devote  his 
activities  to  price,  service,  and  delivery. 

Discussion  of  price  and  quality  can  really  lead  only 
to  one  result.  They  are  fundamentals  that  must  be 
given  equal  consideration  in  every  legitimate  pur- 
chasing transaction  if  well  balanced  results  are  de- 
sired. If  in  any  important  transaction  a  buyer  first 
ascertains  the  minimum  of  quality  that  will  be  ac- 
ceptable to  the  user  and  the  maximum  of  price  that 
will  be  tolerated,  he  can  find,  if  lines  of  price  and 
quality  were  charted,  the  point  at  which  the  two  in- 
tersect. 

Summarizing  the  discussion  of  price,  quality,  and 


68 


PURCHASING  AND  STORING 


service,  it  resolves  itself  into  this:  If  two  or  inore 
sellers  quote  on  identical  articles,  all  naming  tlie 
same  delivery  and  the  same  terms,  and  all  being 
equally  reputable,  the  low  price  should  get  the  busi- 
ness. If  prices,  reputations,  and  terms  were  all  the 
same,  but  one  could  meet  delivery  requirements  bet- 
ter than  the  others,  he  would  get  the  business.  All 
other  things  being  equal,  the  one  having  a  better 
reputation  than  the  others  would  naturally  be  the 
recipient  of  the  order. 

A  real  danger  exists  if  price  is  made  the  prime 
consideration.  If  this  should  be  insisted  upon  by 
all  buyers,  the  result  would  be  that  manufacturer.^ 
would  have  to  cheapen  their  product  to  meet  the 
stipulation.  The  cumulative  effect  of  this  would  be 
retrogression  and  decay. 

Whatever  buyers  may  do,  however,  manufacturers 
are  fortunately  not  inclined  to  follow  this  direction. 
Without  exception  one  may  find  manufacturers  main- 
taining a  fixed  standard  of  quality  or  making  stren- 
uous efforts  to  improve  their  product. 

Price  Knowledg'e. — The  method  of  asking  for  (|uo- 
tations  for  purposes  of  comparison  is  universally 
adopted  by  purchasing  agents.  It  is  sound  in  theory 
and  uniformly, successful  in  securing  prices  for  a  par- 
ticular material  or  article.  It  is  assumed,  of  course, 
that  only  concerns  are  approached  which  are  in  the 
best  position  to  supply  such  material. 

But  when  these  prices  are  obtained  the  buyer's 
price  knowledge  has  not  been  broadened.  They  do 
not  tell  him  why  prices  are  high  or  why  they  aro 
low.    They  do  not  increase  his  knoweldge  of  the  re- 


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70 


PURCHASING  AND  STORING 


THE  PRICE 


71 


i 


lation  between  price  and  demand;  the  relation  be- 
tween trade  cycles  and  prices;  how  advancing  prices 
may  be  anticipated,  and  how  declines  in  prices  may 
be    forestalled.      All    these    things    constitute    price 

knowledge. 

Price  knowledge  starts  by  becoming  well  versed 
both  in  prices  of  daily  purchases  and  of  general  cur- 
rent prices.     Such  knowledge  is  a  valuable  acquisi- 
tion to  any  person  engaged  in  buying  or  selling,  be- 
cause  it  gives  one  a  mental  picture  of  relative  val- 
ues which  cannot  be  obtained  in  any  other  way.    Con- 
tinued application  and  practice  in  reviewing  prices 
will  yield  a  vast  fund  of  information.    An  ability  to 
know    values    can    be    more    easily    developed    than 
might  seem  possible.     Almost  countless  numbers  of 
articles  are  bought  by  some  purchasing  departments, 
and,  of  course,  it  is  not  to  be  supposed  that  their 
prices  can  all  be  retained  mentally;  but  the  depart- 
ment is  a  storehouse  of  information,  and  should  keep 
records,  not  only  of  actual  purchases,  but  of  all  ma- 
terial in  which  the  establishment  may  be  interested. 
Daily  Quotations. — For  prices  of  other  artick^s  of 
interest,  but  which  may  not  pass  through  a  purchas- 
ing department,  the  quotations  in  the  daily  and  trad(' 
papers  may  be  utilized,  as  nearly  all  raw  materials 
and  many  standard  finished  and  semi-finished  articles 
are  listed.     This  source  of  information  is  a  fruitful 
one,  and  a  perusal  or  even  cursory  examination  of 
these  quotations  will  add  greatly  to  price  knowledge. 
A   knowledge   of   daily   quotations   and   prices   of 
daily  purchases  gives  a  sure  indication  of  the  gen- 
eral trend  of  prices.     Everybody  wants  to  know,  or 


to  be  able  to  divine  or  anticipate,  changes  in  prices. 
A  tendency  towards  an  advance  or  decline  can  be 
predicted  with  some  assurance  by  a  close  student 
of  current  prices.  This  is  not  solely  because  of  a 
knowledge  of  a  price  or  prices,  but  because  any 
change  in  a  price  excites  curiosity  as  to  the  cause 
of  the  change;  seeking  for  the  cause  opens  up  a 
whole  field  of  information  on  which  an  opinion  can 
be  based  as  to  future  price  movement. 

In  a  large  company,  or  in  a  concern  where  the 
purchasing  agent  needs  no  authorization  before  mak- 
ing stock  purchases,  such  information  is  exceedingly 
valuable,  for  material  mav  then  be  obtained  at  favor- 
able  periods.  Even  in  those  cases  where  the  pur- 
chasing agent  has  no  authority  to  buy  except  as  in- 
structed, he  can,  nevertheless,  make  suggestions  to 
the  proper  authorities  with  a  view  to  taking  advan- 
tage of  an  existing  favorable  market.  The  buyer 
who  can  forecast  an  era  of  high  or  low  prices  is  a 
factor  of  great  economic  importance  in  any  estab- 
lishment. 

Price  and  Demand. — As  already  stated,  fluctua- 
tions in  prices  force  one  to  look  for  the  cause.  They 
are  usually  found  to  be  the  results  of  fluctuations  in 
demand.  In  other  words,  the  shrewd  buyer  must 
look  beyond  mere  price,  which  is  not  more  than  a 
heginning  of  knowledge  of  the  market.  Knowledge 
cf  demand  gives  an  idea  as  to  probable  rise  and  fall. 
It  is  the  most  powerful  element  affecting  prices. 
Knowledge  of  demand,  therefore,  is  essential,  and 
can  be  acquired  and  assimilated  in  much  the  same 
manner  as  knowledge  of  current  prices. 


72 


PURCHASING  AND  STORING 


THE  PRICE 


73 


With    knowledge    of    demand    must    be    coii])led 
knowledge    of    supply.      Demand   for    a    commodity 
might  be  exceptionally  large,  but  if  the  supply  keeps 
pace  with  the  demand  at  a  proportionate  rate,  little 
or  no  effect  will  occur  in  prices  unless  from  other 
possible  contributory  causes.    Purchasing  agents  are 
apt  to  overlook  or  ignore  the  important  factors  of 
supply  and  demand  so  far  as  their  effect  on  general 
purchases  are  concerned.     But  every  buyer  is  inter- 
ested to  some  degree  in  some  product.     Traders  in 
such  commodities  as  wheat,  cotton,  copper,  or  coffee 
are  keenly  alive  to  the  necessity  of  being  thoroughly 
posted  on  the  supply  and  demand  of  the  commodities 
they   deal   in.     Voluminous    statistics    are   kept    by 
them.    Agents  report  to  them  regularly,  and  special 
avenues  are  kept  open  through  which  this  informa- 
tion can  be  obtained.     Without  such  information  no 
firm  could  hope  to  compete  successfully  with  those 
equipped  with  it. 

Contributory  causes  of  price  changes  are  so  many 
and  so  varied  that  only  a  few  can  be  mentioned.  The 
general  state  of  business  is,  of  course,  one  of  the  de- 
termining factors. 

Sectional  depression  is  another  cause,  but  one  not 
so  prevalent  in  this  country  as  it  once  was.  Tliis  is 
because  industries  are  becoming  more  widely  scat- 
tered. The  prosperity  of  the  Southern  States,  for 
instance,  is  not  now  entirely  tied  up  with  cotton.  If 
any  particular  industry  is  more  prosperous  than  an- 
other, other  industries  must  benefit  from  this  pros- 
perity, and  this  tends  to  keep  industry  in  general  on 
a  common  level.     Better  communications,   transpor- 


tation, and  the  spreading  and  diversification  of  man- 
ufacturing throughout  the  country  all  exert  an  equal- 
izing effect  on  business  conditions  between  the  vari- 
ous sections. 

Another  factor  affecting  business,  and  therefore 
prices,  is  politics.  This  is  not  only  because  the  tariff 
question  is  kept  alive,  but  also  because  of  the  attitude 
of  politicians  towards  capital  and  labor.  If  the  tariff 
question  were  settled  on  a  scientific  basis  and  both 
capital  and  labor  were  satisfied  that  a  square  deal 
would  always  be  accorded  them,  business  would  be- 
come more  stable. 

Strikes,  lockouts,  freight  embargoes,  and  other  dis- 
turbances also  upset  markets,  and,  in  the  case  of 
perishable  goods,  create  at  least  a  temporary  demor- 
alization in  the  prices  of  the  goods  affected. 

Trade  Cycles  and  Prices.— What  is  a  normal  con- 
dition of  business?  Either  prosperity  or  depression 
might  endure  so  long  that  the  resulting  condition 
could  rightly  be  regarded  as  normal.  But  business 
is  nearly  always  moving  in  cycles,  and  at  each  period 
of  the  cycle  a  different  buying  policy  should  prevail. 
Wliile  the  high  and  low  points  of  a  cycle  may  not 
reach  such  acute  stages  as  to  be  designated  '*  pros- 
perity" and  **  depression, ' '  these  terms  will  be  used 
here  for  illustration. 

First  Period:  Liquidation.  This  period  is  indicated 
by  declining  prices,  and  the  buyer's  policy  during 
such  a  period  is  to  purchase  only  what  is  abso- 
lutely necessary— to  accumulate  no  stocks  of  raw 
material,    and   to   keep   the   minimum    amount    on 


I 


74 


PURCHASING  AND  STORING 


THE  PRICE 


75 


hand  that  will  assure  the  production  department 
a  supply  equal  only  to  its  immediate  needs. 

Second  Period:  Depression.  During  this  period 
more  confidence  can  be  displayed  in  buying  as  low 
prices  prevail;  but  it  is  not  wise  to  purchase  too 
heavily  until  there  are  signs  that  the  liquidation 
period  has  exhausted  itself. 

Third  Period:  Improvement.  This  period  is  an  era 
of  advancing  prices,  and  buying  can  proceed  con- 
fidently for  requirements  as  far  ahead  as  one's 
finances  will  permit. 

Fourth  Period:  Prosperity.  It  is  taking  consider- 
able risk  to  buy  heavily  during  such  a  period  as 
this.  Prices  are  high  and  irregular,  and  great  care 
should  be  exercised  in  making  [mrchases.  Some 
commodities  will  reach  the  peak  prices  earlier 
than  others;  while  many  may  fluctuate  in  a  most 
tantalizing  manner,  touching  the  liigh  point  several 
times  during  the  period. 

Exports  and  Prices.— The  exports  of  this  country 
are  normally  greater  than  its  imijorts.  When  this 
condition  reaches  abnormal  proportions,  as  during 
the  shipment  of  supplies  to  the  European  nations 
during  the  war,  it  has  a  distinct  influence  on  prices. 
We  are  sending  away  our  wealth  in  the  sha])e  of 
steel,  copper,  and  other  metals  in  raw,  semi-manu- 
factured, and  finished  manufactured  products,  and 
also  a  great  many  commodities.  The  available  sup- 
ply decreases  and  prices  advance,  but  the  situation 
is  aggravated  by  the  fact  that  we  receive  in  ex- 
cliange  large  amounts  of  cash.     Thus  our  wealth  in 


actual  cash  is  increased  abnormally,  and  the  money 
so  obtained  may  be  used  improperly  for  speculative 
purposes,  creating  unhealthy  booms.  Even  if  it  is 
used  for  investment  in  real  estate  or  in  the  purchase 
of  automobiles,  it  has  the  effect  of  advancing  the 
real  estate  values  and  the  prices  of  automobiles. 

If  we  had  need  of  or  could  accept  other  material  as 
imports  to  offset  our  exports,  prices  of  many  things 
would  remain  more  stationary.  This  is  the  condi- 
tion in  Great  Britain  and  in  other  countries  where 
the  imports  have  always  been  largely  in  excess  of 
exports.  Of  course,  large  amounts  of  cash  due  us 
from  other  countries  in  payment  for  the  exports 
have  never  reached  us,  but  instead  have  been  used 
to  liquidate  the  debts  we  owe  to  those  countries.  We 
have  been  losing  material  possessions,  but  we  are 
becoming  independent  financially.  This  may  be  going 
a  little  beyond  the  subject  under  discussion,  but  is 
intended  to  show  what  effect  abnormal  exports  have 
on  prices  and  in  what  manner  a  surplus  of  money 
will  influence  them. 

Price  Authority. — The  purchasing  department 
should  be  supreme  throughout  any  organization  on 
all  questions  of  prices  of  materials  and  supplies, 
whether  used  in  the  production  department  or  not. 
Sellers  should  not  be  allowed  to  quote  to  heads  of 
departments;  to  do  so  weakens  the  authority  of  the 
purchasing  agent.  When  he  is  known  to  be  the  court 
of  last  resort,  he  becomes  an  element  of  power  to  be 
reckoned  with. 

Many  establishments  maintain  an  extensive  esti- 
mating department,  and  quite  often  this  department 


76 


PURCHASING  AND  STORING 


THE  PRICE 


77 


needs  prices  of  certain  materials  for  the  contracts 
on  which  it  is  estimating.  Those  prices  should  al- 
ways be  obtained  through  the  purchasing  depart- 
ment. There  are  several  reasons  for  this:  the  de- 
partment should  know  the  best  source  of  supply;  the 
price  knowledge  of  the  department  is  increased,  and 
finally  its  records  are  enriched  by  tabulating  the  in- 
formation obtained. 

Negotiations  leading  to  the  establishment  of  a 
price  with  the  seller  should  be  entirely  in  the  haiid§ 
of  the  purchasing  agent,  and  he  should  be  sole  ar- 
biter in  all  the  final  arrangements. 

In  making  a  decision  as  to  best  price  or  with 
whom  an  order  should  be  placed  several  factors,  such 
as  cash  discounts,  terms,  f .  o.  b.  points,  etc.,  must  be 
considered.  These,  however,  open  up  such  a  wide 
range  of  possibilities  that  their  discussion  will  be 
left  to  another  chapter.  Assuming  that  each  bid<ier 
stands  equally  on  these  contingent  possibilities,  the 
present  discussion  will  be  confined  to  the  manner 
of  getting  the  lowest  price. 

Manipulated  Prices. — Taking  the  most  disagree- 
able feature  first,  the  question  of  manipulated  or 
artificial  prices  will  be  considered.  Anything  of  this 
nature  is  a  source  of  annoyance  and  irritation 
to  the  buyer  because,  in  most  cases,  he  can  do  so 
little  to  evade  paying  the  inflated  price.  Many  buy- 
ers, not  knowing  when  a  price  is  artificial  or  is  not 
warranted  by  conditions,  pay  it  in  happy  ignorance; 
but  the  astute  buyer  knows,  because  his  observations 
and  records  of  available  quantities  and  market  con- 
ditions have  kept  him  informed. 


In  the  case  of  a  patented  process  or  article  the 
manufacturer  is  entitled  to  a  fair  and  legitimate 
profit,  not  only  on  his  manufacturing  costs,  but  also 
on  his  work  in  developing  and  perfecting  the  process 
or  article.  No  buyer  can  object  to  paying  a  price 
arranged  on  such  a  basis;  but  when,  by  manipula- 
tion or  combination,  a  price  unwarranted  by  known 
and  existing  conditions  is  quoted,  the  buyer  has  every 
justification  in  attempting  to  get  around  it. 

Unfortunately,  as  a  rule,  there  is  very  little  the 
buyer  can  do.  It  is  in  such  instances,  however,  that 
his  knowledge  of  substitutes,  as  previously  men- 
tioned, or  his  ability  to  develop  a  new  market,  may 
stand  him  in  good  stead. 

Competitive    Prices. — Unrestricted,    open    competi- 
tion is  a  pleasant  field  for  the  purchasing  agent  to 
browse  around  in,  for  here  his  activities   can  have 
full  play.     This  method  of  securing  bids  from  two 
or   more   sellers   must   be    employed   irrespective    of 
how  profound  a  knowledge  of  prices  one  may  have. 
The  firms  asked  to  quote  must  be  competent   to 
handle  the  business.     Any   concern  whose   bid   will 
not  be  considered  in  the  last  analysis  should  not  be 
asked  to  quote.     It  is  a  waste  of  both  the  buyer's 
and  the  seller's  time.    The  wording  of  the  invitation 
to  bid  should  be  lucid,  and  should  state  distinctly 
the  quantity,  grade  or  quality,  and  be  accompanied 
by   complete  detailed  specification  if  necessary.     It 
should  be  stated  whether  a  lump  sum  price  or  unit 
price  is  desired.     The  unit  price  method  is  generally 
favored,  because  if  there  should  be  any   change   in 
quantities  between  the  time  the  inquiry  is  sent  out 


78 


PURCHASING  AND  STORING 


THE  PRICE 


79 


and  the  order  placed  change  can  be  automatically 
taken  care  of.  Unit  bids  are  also  useful  for  record- 
ing the  separate  prices,  as  well  as  for  future  refer- 
ence. 

Having  these  competitive  prices  tabulated  for  ex- 
amination several  salient  points  may  possibly  thrust 
themselves   on   the   attention   of  the   shrewd  buy(ir. 
Should  all  quotations  be  uniformly  equal  it  will  indicate 
cither  that  manufacturing  methods  are  so  standardized 
and   perfected    that    all    bidders    are    figuring    on    a 
similar  basis  of  costs,  or  that  some  trade  agreement  or 
combination  exists  for  maintaining  prices  at  a  fixed 
level.    Should  one  quotation  be  notably  lower  tlian 
all  the  others,  a  master  of  prices  would  rightly  regard 
it  with  some  suspicion,  and  his  sound  knowledge  of 
prices  would  suggest  to  him  that  the  goods  could  not 
be  produced  at  the  figure  named  unless  the  quality 
were  inferior.     But  just  because  a  quotation  is  low  is 
not  an  adequate  reason  for  discarding  it  entirely,  for 
assuming  that  a  reputable  concern,  as  should  be  the 
case,  has  made  the  quotation  it  is  worthy  of  con- 
sideration.    On  investigation  it  may  be  found  that 
there  are  good  and  sufficient  reasons  for  the  low  price. 
It  may  have  been  induced  by  a  desire  on  the  part  of 
the  seller  to  keep  a  section  of  his  factory  in  opera- 
tion, or  to  reduce  a  surplus  stock  of  material. 

When  bids  on  identical  specifications  show  wide 
variations,  the  purchaser  should  immediately  find  out 
whether  any  double  meaning  could  be  read  into  the 
specification,  and  it  is  advisable  to  interview  both 
the  highest  and  lowest  bidders  and  go  over  their 
proposals.     This  will  bring  to  light   any  misconcep- 


tions which  may  exist.  Variations  in  quoted  prices 
quite  often  occur  in  the  purchase  of  tools  and  ma- 
chinery, because  it  is  the  practice  of  some  makers  to 
quote  for  the  bare  machine,  while  others  will  include 
some  additional  parts  and  attachments.  For  this 
reason  all  quotations  for  machinery  equipment  and 
appliances  should  be  carefully  scrutinized. 

These  instances  come  up  in  the  course  of  every 
active  purchasing  agent's  work.  By  way  of  illus- 
tration: an  inquiry  sent  out  for  some  voltmeters  and 
ammeters  mounted  on  slate  panels  elicited  a  reply 
quoting  for  the  instruments  **as  shown  in  our 
catalogue  pages  53  and  56.''  This  quotation  was  for 
the  instruments  required  and  was  in  every  way  ac- 
ceptable— except,  on  reference  to  the  catalogue,  it  was 
found  that  only  the  bare  meters  were  illustrated; 
hence,  the  quotation  did  not  include  any  panels,  or 
even  the  lugs  for  them!  For  his  own  protection  a 
buyer  should  carefully  check  up  any  references  to 
catalogues  or  prints.  In  the  case  cited  it  may  not 
have  been  intentional  on  the  bidder's  part  to  call  at- 
tention to  the  fact  that  he  had  not  included  the 
panels,  but  if  the  order  had  been  placed  the  respon- 
sibility would  clearly  have  rested  upon  the  buyer. 

Strategy  in  Arranging  Prices.— Much  misinforma- 
tion exists  as  to  the  manner  in  which  a  purchasing 
agent's  activities  are  conducted.  The  opinion  is  far 
too  prevalent  that  he  exists  mainly  to  beat  down  the 
seller's  price.  This  may  have  been  true  at  one  time, 
hut  to-day  sellers  will  not  tolerate  much  of  this,  even 
if  buyers  were  generally  disposed  to  use  such  tactics. 

Probably  no  two  purchasing  agents  go  about  their 


80 


PURCHASING  AND  STORING 


THE  PRICE 


81 


job  of  buying  on  exactly  similar  lines,  but  all  buyers 
have  a  common  object — to  obtain  the  lowest  price  for 
the  goods  they  are  ordering.  The  desire  to  close  a 
deal  at  the  right  price  and  secure  every  concession 
possible  from  the  seller  is  a  phase  of  the  commercial 
instinct  which  must  be  present  in  every  good  buyer. 

Tactics  and  strategy  play  their  part  in  the  negotia- 
tions leading  up  to  the  actual  placing  of  an  order, 
but  not  to  the  extent  they  formerly  did  when  busi- 
ness was  done  on  more  direct  lines.  The  present 
ramifications  of  business  call  for  entirely  different 
methods  than  those  which  prevailed  when  the 
producer  and  consumer  were  nearer  to  each  other, 
when  jobbers,  salesmen,  and  other  intermediaries 
were  not  so  numerous,  and  when  manufacturing  was 
not  so  highly  specialized  as  it  is  now. 

It  was  not  so  long  ago  that  the  generally  accepted 
theory  of  the  qualifications  necessary  for  a  good  buyer 
was  an  ability  to  bluff  the  seller  and  to  adopt  some 
such  tactics  as  have  been  so  well  illustrated  in  '*  David 
Harum."  While  developments  have  been  taking 
place  in  the  function  of  buying,  the  old-fashioned  per- 
suasive type  of  drummer  has  been  giving  place  to 
the  modern  scientfic  salesman. 

Despite  the  fact  that  the  modern  buyer  is  sur- 
rounded by  an  accumulation  of  facts  concerning  his 
purchases,  his  sources  of  supply,  records  and  prices, 
and  other  information  on  which  to  base  his  judgment, 
there  are  situations  which  arise  in  the  experience  of 
every  buyer  when  tactical  and  strategic  moves  are 
necessary  to  put  through  a  deal  on  satisfactory  lines. 

If  a  buyer  relied  solely  on  the  information  he  has 


scientifically  accumulated,  it  might  tell  him  to  do  one 
thing,  whereas  his  instinct  for  a  good  purchase  might 
suggest  doing  something  different.  The  records 
which  are  gathered  by  purchasing  agents  have  had 
a  tendency  to  eliminate  the  purely  trader's  instinct 
from  the  buyer's  psychology,  but  that  this  instinct  is 
still  necessary  cannot  be  gainsaid. 

Bujring  Methods. — Buying  methods  have  changed 
considerably  in  recent  years,  and  the  tendency  among 
manufacturers  and  suppliers  is  to  quote  the  lowest 
price  they  can  consistently  make.  They  do  not  ex- 
pect or  wish  to  quote  a  second  and  lower  price.  One 
reason  for  this  is  that  they  now  have  more  accurate 
cost  accounting  systems  and,  hence,  can  more  cor- 
rectly determine  their  costs,  and  therefore  their  selling 
prices.  When  a  manufacturer  is  uncertain  of  his 
costs  he  is  usually  uncertain  as  to  the  price  he  quotes, 
and  is  frequently  susceptible  to  an  offer  of  an  order 
at.  a  lower  price.  A  large  and  shrewd  buyer  once 
made  the  statement  to  the  writer  that  the  first  price 
quoted  by  a  manufacturer  was  never  his  lowest  price. 
To  a  certain  extent  this  may  have  been  true  at  one 
time,  and  resulted  in  innumerable  schemes  and  con- 
siderable maneuvering  on  the  buyer's  part  to  get  a 
reduction  in  the  price. 

With  the  standards  now  maintained  by  most  con- 
cerns the  practice  of  offering  an  order  at  a  lower 
price  cannot  be  defended.  If  such  were  the  general 
custom  of  a  buyer  the  prices  quoted  to  him  would 
always  be  on  a  basis  which  could  be  scaled.  Many 
Hianufacturers  will  not  consider  or  sanction  methods 
of  this  character. 


82 


PURCHASING  AND  STORING 


THE  PRICE 


83 


Nevertheless,  there  are  instances  where  an  order 
might  be  ** offered"  to  a  manufacturer.  This  has 
been  done  many  times  recently  in  those  cases  wlu»re 
the  concern  quoting  the  lowest  price  was  so  loaded 
up  with  work  or  so  located  on  a  transportation  line 
that  prompt  delivery  was  extremely  problematical. 
In  such  an  instance  the  buyer  is  justified  in  endeavor- 
ing to  get  another  manufacturer  more  favorably 
located  to  meet  the  competitive  price. 

Examples  of  Buying  Methods. — A  case  in  which  a 
purchasing  agent  did  some  thinking  outside  of  his 
routine  work  occurred  in  connection  with  an  order  for 
malleable  iron  castings.  These  had  always  l)een 
bought  in  quantities  of  ten  thousand  at  a  time  and 
had  been  purchased  from  one  foundry.  The  original 
pattern  had  been  made  by  the  foundry,  and  the 
sample  casting  submitted  by  them  had  been  approved. 
A  new  man  was  put  in  charge  of  the  purchasing,  and 
the  first  time  he  was  called  upon  to  buy  these  par- 
ticular castings  he  sent  blueprints  to  several  foundries 
with  requests  for  quotations.  The  concern  that  had 
always  supplied  the  castings  was  the  lowest  bidder, 
and  there  seemed  no  reason  why  it  should  not  receive 
the  order. 

The  price  quoted  had  been  per  pound,  but  the  pur- 
chasing agent  asked  for  second  bids,  the  unit  ])rice 
to  be  per  casting.  As  a  result  two  quotations  were 
received  lower  than  the  one  from  the  foundry  that 
had  always  supplied  the  castings.  On  investigation 
it  was  found  that  the  original  pattern  had  been  made 
too  full  all  over,  making  the  castings  twenty  per  cent 
heavier   than   necessary.     Consequently   a   saving   of 


nine  hundred  dollars  was  effected  in  the  quantity 
ordered.  Had  the  purchasing  agent  been  content  to 
accept  the  quotation  per  pound  instead  of  checking  it 
with  a  unit  price  for  each  casting  his  company  might 
have  gone  on  indefinitely  paying  for  twenty  per  cent 
more  metal  than  they  needed. 

In  negotiating  for  a  six  months'  supply  of  machine 
bolts,  a  purchasing  agent  had  a  problem  to  solve 
which  comes  to  every  buyer  at  some  time.  He  had 
determined  from  his  records  and  information  that  a 
certain  manufacturer  was  best  fitted,  equipped,  and 
located  to  handle  the  contract,  but  his  price  was 
higher  than  several  others.  On  careful  consideration 
the  purchasing  agent  felt  that  he  was  not  justified  in 
paying  the  higher  price,  but  at  the  same  time  did  not 
abandon  the  idea  of  getting  him  to  accept  the  eon- 
tract. 

He  kept  the  negotiations  open  until  the  time  was 
approaching  when  deliveries  would  have  to  com- 
mence, and  he  felt  he  could  not  safely  postpone  doing 
something.  In  delaying  the  closing  of  the  contract  he 
had  the  salesmen  of  the  bolt  manufacturers  anxious 
and  uneasy,  and  finally  the  one  representing  the  low- 
est bidder  signed  a  contract  for  an  order  of  a  small 
quantity  and  gave  the  purchaser  an  option  on  the 
whole  quantity.  Having  this  as  a  safeguard,  the  pur- 
chasing agent  was  able  to  adopt  an  attitude  of  com- 
plete indifference  to  the  other  manufacturers.  Hence, 
when  the  specified  date  arrived  on  which  deliveries 
should  begin,  the  manufacturer  with  whom  the  pur- 
chasing agent  desired  to  make  the  contract  offered  to 
sign  up  at  the  price  of  the  lowest  bidder. 


84 


PURCHASING  AND  STOlilNG 


THE  PRICE 


85 


The  first  contract  was  something  to  fall  back  on, 
and  was  made  as  an  insurance  against  being  left  if 
the  other  manufacturer  did  not  come  to  the  terms  and 
price  the  purchasing  agent  felt  justified  in  paying. 
The  small  quantity  specified  in  this  contract  was 
taken,  and  the  purchasing  agent  was  also  able  to  give 
more  business  for  other  material  to  the  same  con- 
cern; but  the  main  contract  for  bolts  went  to  the 
manufacturer  who  had  been  selected  in  the  first  place 
by  the  purchasing  agent  as  the  one  to  whom  the 
preference  should  be  given  if  the  prices  were  equal. 

Diplomacy  cannot  be  systematized,  tabulated,  nor 
card  indexed,  but  it  can  be  developed,  and  every  pur- 
chasing agent  will  find  ample  use  for  it.  The  simple 
cases  related  are  actual  experiences,  Imt  there  are  oc- 
casions when  the  moves  made  in  negotiating  a  pur- 
chase are  very  much  more  intricate  and  involved. 
The  intent  has  been  to  point  out  th(»  value  of  using 
a  little  diplomacy  in  conjunction  with  the  scientific 
knowledge  which  every  purchasing  agent  should 
possess.  A  too  rigid  adherence  to  fixed  methods 
would  be  a  deterrent  in  many  cases,  while  the  adop- 
tion of  somewhat  different  tactics  would  consummate 
many  a  deal  on  satisfactory  lines. 

Resale  Prices. — Certain  manufacturers  elect  to  sell 
their  product  through  jobbers,  dealers,  merchants,  or 
whatever  trade  name  these  middlemen  do  business 
under.  It  is  the  custom  for  the  manufacturer  to  sell 
to  the  dealer  at  a  lower  figure  than  to  a  consumer. 
This  is  the  dealer's  protection.  Sometimes  a  manu- 
facturer will  rigidly  adhere  to  this  policy,  while 
others  will  sell  to  whomsoever  they  can.    Abuses  of 


these  ramifications  of  business  arise  in  every  direc- 
tion, and  it  is  not  proposed  to  discuss  them  here;  but 
a  purchasing  agent  should  know  when  they  exist,  and 
he  can  only  gain  this  by  experience. 

Some  purchasing  agents  are  legitimately  entitled 
to  a  ** resale"  price.  A  builder  of  machine  tools,  for 
instance,  who  does  not  build  the  motors  for  operat- 
ing them  can  always  obtain  a  ** resale"  price  on 
motors  if  they  are  to  be  sold  again  with  the  machine. 
This  condition  applies  to  many  articles  which  are 
finished  machines  or  appliances  in  themselves,  but  are 
purchased  to  form  part  of  another  equipment. 

Many  buyers  for  large  corporations  obtain  the 
regular  discount  allowed  to  dealers  simply  by  reason 
of  the  large  consumption  by  their  establishment. 
Again,  some  manufacturers  have  a  sliding  scale  of 
discounts;  to  the  largest  buyers  the  largest  discount 
is  quoted,  and  this  discount  diminishes  in  a  ratio 
proportionate  to  the  amount  of  the  purchase.  Such 
a  policy  has  been  bitterly  assailed  by  some  on  the 
grounds  that  it  places  a  handicap  on  the  small  user 
and  favors  *^big  business"  interests.  There  is  some 
truth  in  this  contention,  because  the  big  buyer  often 
may  not  take  any  larger  quantities  at  one  time  than 
the  small  one. 

Price  Based  on  Performance. — This  method  of 
establishing  prices  has  been  slowly  developing  and  is 
steadily  growing  in  favor,  but  at  present  is  confined 
to  a  very  limited  number  of  articles.  No  reason 
exists  why  it  should  not  be  extended  in  connection 
^vith  more  scientific  manufacturing  and  the  standard- 
isation    of    products     and     commodities.     Technical 


86 


PURCHASING  AND  S'lOlilNC 


THE  PRICE 


87 


knowledge  of  materials,  new  ideas  and  inventions  in 
manipulating  these  materials  in  the  manufacturing 
process,  and,  finally,  skill  and  long  practice  in  the 
application  of  the  finished  article  to  its  ultimate  use, 
are  bringing  about  a  condition  where  the  producers 
and  sellers  are  abl'e  to  guarantee  certain  definite  re- 
sults. 

Railroads  have  long  bought  lubricants  for  rolling 
stock  on  this  basis.  Coal  is  quite  commonly  paid  for 
on  the  number  of  heat  units  generated.  Brake  shoes 
and  automobile  tires  are  other  well  known  examples 
of  price  based  on  economy  of  operation.  With  more 
definite  information  regarding  performance  under 
operating  and  manufacturing  conditions  there  is  no 
reason  why  this  form  of  buying  should  not  spreaii. 

Price  Guaranties. — Many  sellers  are  quite  willing  to 
enter  into  agreements  to  guarantee  certain  prices  for 
a  fixed  period  of  time.  Not  only  will  they  undertake 
to  furnish  all  the  buyer's  requirements  of  the  material 
stipulated  during  the  stated  period,  but  they  will  go 
further  and  guarantee  the  purchaser  against  any  de- 
clines in  the  market  price  during  the  life  of  the  agree- 
ment. Many  buyers  have  fought  shy  of  purchasing 
on  this  bases,  either  because  the  conditions  did  not 
appeal  to  them  as  equitable  or  because  of  a  fear  that 
by  tying  themselves  up  to  one  source  of  •supply  they 
would,  at  the  expiration  of  the  agreement,  have  a 
limited  competition  for  future  requirements  and 
would  be  liable  to  a  **hold  up"  on  the  part  of  the 
original  seller  if  the  price  in  the  meantime  had  gone 
against  him  and  had  involved  him  in  a  loss. 

The  first  reason  has  no  foundation  in  fact.    If  it  is 


Inequitable  in  that  it  obliges  one  party  to  assume  a 
risk  not  shared  by  the  other  it  cannot  long  be  main- 
tained. Prices  can  be  guaranteed  without  undue  risk, 
because  the  guarantor  has  a  like  guarantee  for  his 
raw  material  and  can  calculate  his  labor  and  overhead 
expense  very  closely  for  the  period  of  the  contract, 
with  the  strong  probability  that  they  will  remain 
stationary  or  nearly  so.  Any  risk  of  advance  in  these 
is  offset  by  the  possibility  that  he  may  be  able  to  re- 
duce them. 

More  tangible  reasons  to  support  the  contention  that 
the  buyers'  market  would  be  restricted  by  entering 
into  such  price  agreements  might  occur,  but  these 
apply  only  in  those  instances  where  the  sources  of 
supply  are  limited.  If  there  are  only  a  few  sources 
and  each  one  of  these  ties  itself  up  with  certain 
buyers,  the  sellers  can  virtually  control  the  situation 
when  the  time  comes  to  make  renewals.  The  buyer 
can  overcome  this  obstacle,  however,  by  covering  his 
requirements  by  price  guarantees  with  tw^o  or  more 
sellers.  This  will  be  more  fully  considered  in  the 
discussion  of  orders  and  contracts. 

Price  Maintenance. — The  following  quotation,  from 
an  editorial  in  the  New  York  Times,  is  of  considerable 
interest  because  it  discloses  the  fact  that  Congress  is 
taking  notice  of  the  practice  of  selling  at  a  lower 
price  articles  absolutely  identical  with  patented  ones 
and  made  by  the  same  manufacturers. 

The  matter  of  price  maintenance,  which  has  engaged  the 
attention  of  Congress  at  odd  times  for  several  years,  promises 
to  come  in  for  further  notice.  Among  the  first  of  the  bills 
introduced  on  the  day  when  Congress  met  was  the  one  by 


88 


PURCHASING  AND  STORING 


Representative  Stephens  of  Nebraska,  which  failed  to  pass  in 
the  session  that  closed  on  March  4.    As  a  pendant  to  it  was 
another  bill,  with  an  additional  section,   which  is  peculiar. 
This  new  feature  makes  price  maintenance  not  apply  where 
the  label  or  container  does  not  show  the  source  of  production, 
and  concerning  which  no  representation  is  made  that  it  is  the 
''product  of,  or  associated  with,  the  name  and  reputation,  of 
any  grower,  producer,  manufacturer,  or  owner  of  a  trade- 
mark or  special  brand."     Such  a  provision  would  seem  to 
intimate  that  a  number  of  producers  and  manufacturers  have 
made  it  a  practice  to  turn  out  goods  without  their  distinguish- 
ing labels,  which  have  been  sold  at  lower  prices  than  goods 
that  were  branded.     A  number  of  such  instances  have  been 
referred  to  in  the  discussions  of  the  subject  of  price  main- 
tenance, many  of  them  referring  to  foods.    The  practice,  how- 
ever, is  not  unknown  in  the  textiles.     Those  who  sold  such 
goods  gave  their  customers  to  understand  that  the  lack  of 
trademarks  or  labels  enabled  them  to  get  identical  articles  at 
lower  prices.     They  would  not  be  able  to  make  such  repre- 
sentations should  the  proposed  legislation  be  enacted.    It  is  a 
little  difficult  to  make  out  whom  this  would  hurt  most. 

Other  Arrangements. — ^Prices  are  sometimes  ar- 
ranged, as  previously  mentioned,  on  a  sliding  scale 
basis,  the  scale  conforming  to  the  quantity  bought  by 
the  consumer.  Again,  prices  may  be  arranged  at  a 
certain  percentage  plus  or  minus  the  market.  Inhere 
are  also  prices  fixed  by  implication.  These  occur  in 
**pick  up,"  *'rush,"  and  emergency  orders,  no  price 
Keing  actually  mentioned,  the  supposition  being  that 
the  prevailing  market  prices  will  api)ly. 

After  all  is  said  about  prices  the  fixing  of  the  price 
at  which  an  order  is  closed  is  a  mutual  affair.  Sellers 
do  not  like  to  think  that  they  are  dictated  to  by  the 
buyer,  and  salesmen  of  repute  would  scorn  such  an 
imputation.  On  the  other  hand,  purchasing  agents 
are  apt  to  feel  that  prices  are  largely  controlled  by 


THE  PRICE 


89 


supply  and  demand,  added  to  which  is  the  influence 
of  his  personal  acumen  and  perspicacity. 

It  should  be  borne  in  mind  that  abnormally  high 
prices  are  always  subject  to  decline,  and  quite 
frequently  the  decline  is  at  a  more  rapid  pace  than  an 
advance  would  be.  When  prices  are  rising  there  are 
always  some  orders  placed  in  anticipation  of  still 
higher  prices,  while  in  the  decline  the  tendency  is  to 
hold  back  for  lower  prices.  This  accelerates  both  the 
rise  and  fall. 

Speculation  and  gambling,  as  the  terms  are  gen- 
erally understood,  should  have  no  place  in  the  pur- 
chasing agent's  psychology,  but  it  requires  no  genius 
to  buy  at  the  ruling  or  normal  prices.  To  keep  a 
close  watch  on  the  trend  of  prices  and  movements  of 
commodities,  to  study  all  factors  that  may  influence 
an  advance  or  decline  in  values,  to  buy  sparingly 
when  prices  are  on  the  down  grade  and  liberally  when 
on  the  up  grade,  and  finally  to  evade  the  evil  of  over- 
buying at  the  break  of  the  market,  is  not  speculation 
or  gambling — it  is  purchasing  reduced  to  a  science. 


CHAPTER  V 


THE  CONTKACT 


Care  in  Making  the  Agreement. — Every  buyer 
should  have  due  appreciation  of  the  importance  of 
orderly  procedure  in  arranging  all  tlie  details  of  his 
orders  and  contracts.  Intelligent  care  must  be  exer- 
cised, and  there  must  be  rigid  adherence  to  a  few 
simple  essential  rules  and  methods,  both  prior  to  the 
placing  of  an  order — while  the  negotiations  are  in 
progress  regarding  prices,  terms,  and  other  details — 
and  when  the  order  is  being  actually  closed,  either 
verbally  or  in  writing.  For  his  own  protection,  and 
to  prevent  disputes,  the  primary  interest  and  concern 
of  the  buyer  should  be  the  strict  ol)servance  of  the 
elementary  rules  with  respect  to  th(»  constitution  of 
the  contract,  in  order  that  all  the  stipulations  con- 
tained in  it  may  be  clear,  exact,  and  comprehensive. 

Before  any  purchase  can  be  consummated  the  two 
parties  concerned — i.e.,  the  buyer  and  the  seller — 
must  reach  an  agreement.  This  agreement,  whatever 
the  manner  in  which  it  is  reached,  is  the  all-important 
basis  of  the  contract.  In  fact,  the  agreement  is  the 
contract,  and  all  the  future  relations  between  the  two 
parties,  in  so  far  as  the  particular  transaction  is  con- 
cerned, are  governed  by  this  agreement. 

The  agreement  to  buy  and  sell  must  consist  of  an 

90 


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91 


offer  by  one  party  and  its  acceptance  by  the  other. 
This  implies  that  there  must  be  a  complete  mutual 
understanding  of  the  exact  and  definite  nature  of  the 
material  or  article  being  bought  and  sold,  the  price, 
terms  of  payment,  and  other  conditions.  In  the  gen- 
eral practice  of  purchasing,  innumerable  questions  are 
continually  arising  after  an  order  is  placed,  regarding 
the  stipulations  and  conditions  of  the  agreement. 
These  questions  lead  to  an  examination  of  the  factors 
on  which  the  agreement  was  based,  and  in  cases  of 
dispute  it  will  always  be  found  that  the  misunder- 
standing has  been  caused  by  insufficient  attention 
being  given  to  some  essential  details. 

Verbal  Orders. — If  an  agreement  is  reached  between 
buyer  and  seller  solely  through  conversations,  it  is  a 
verbal  contract ;  a  very  large  number  of  contracts  are 
closed  in  this  way.  The  conditions  governing  pur- 
chasing for  industrial  establishments  demand  that 
these  verbal  agreements  be  reduced  to  writing,  and  it 
is  important  that  formal  orders  embodying  the 
features  of  the  agreement  be  written  up  and  delivered 
to  the  seller. 

Written  Contracts. — These  are  necessary  not  only 
for  the  smooth  and  efficient  working  of  the  physical 
and  mechanical  features  of  a  purchasing  agent's  office, 
but  because  of  the  practical  desirability  and  even 
necessity  of  written  communications.  If  an  agree- 
ment has  been  reached  verbally  there  should  be  no  de- 
lay in  putting  it  into  writing,  and  certainly  this 
sliould  be  done  before  the  seller  has  taken  any  steps 
to  manufacture  or  deliver  the  goods.  If  there  has 
been  any  misunderstanding,  it  is  then  brought  to  the 


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m 


attention  wlien  the  contract  is  put  in  writing,  and 
mistakes  can  be  rectified  and  adjusted  in  the  earliest 
stages,  while  all  the  details  are  fresh  in  the  memory. 

Preliminary  Communications. — I  have  already  em- 
phasized the  fact  that  the  negotiations,  communi* na- 
tions, and  dealings  leading  up  to  the  consummation 
of  the  transaction  are  of  primary  importance.  It  is 
of  the  utmost  importance,  also,  that  tliese  be  carried 
on  in  the  clearest  possible  way.  Memoranda  should 
be  made  of  all  prices  and  figures  quoted  in  inter- 
views or  by  telephone.  The  buyer  should  ask  the 
seller  to  confirm  immediately  in  writing  any  under- 
standing arrived  at  in  this  way,  or  he  should  himself 
forward  at  once  to  the  seller  a  formal  order  embody- 
ing the  agreed  terms  and  conditions,  at  the  same  time 
making  reference  to  the  verbal  arrangement  on  which 
the  order  is  based. 

For  the  clearer  understanding  of  the  preliminary 
and  final  negotiations,  and  for  the  purpose  of  having 
these  follow  a  well-defined  and  regular  course,  it  is 
absolutely  necessary  to  have  standardized  forms  for 
all  communications  that  pass  betw(^en  buyer  and 
seller.  These  include  well-recognized  forms  for  re- 
questing quotations  and  the  acceptance  of  offers 
either  by  letter  or  by  telegram,  and  forms  of  orders 
issued  with  or  without  a  preliminary  agreement  con- 
cerning the  exact  terms. 

Distinction  Between  Offer  to  Sell  and  Tentative 
Bid. — It  is  important  from  the  viewpoint  of  both 
parties,  that  a  distinction  be  made  between  an  off<»r 
to  sell  and  a  tentative  bid.  A  buyer  might  so  frame 
a  letter  that  it  would  convey  the  meaning  that  he  is 


making  an  offer  to  buy,  whereas  he  may  only  wish  a 
quotation,  or  an  offer  to  sell,  from  the  vendor.  Any 
communications  from  sellers,  naming  prices,  should 
be  closely  scrutinized,  for  it  is  important  to  determine 
whether  there  is  really  a  definite  offer  to  sell  or  only 
a  tentative  quotation.  If  a  buyer  wishes  to  take  ad- 
vantage of  an  offer  to  sell,  he  should  promptly  com- 
municate his  acceptance  in  writing.  Sometimes  a 
quotation  will  be  made  subject  to  acceptance  within 
a  specified  time;  such  a  limitation  implies  an  agree- 
ment to  sell  before  the  date  named.  It  is  often  ad- 
visable for  the  purchaser  to  ask  for  bids  containing  a 
stipulation  of  this  character,  to  enable  him  to  consult 
with  others  before  closing  the  deal. 

A  fact  to  be  remembered  is  that  if  an  offer  is  made 
by  either  party,  and  in  communicating  an  acceptance 
the  other  party  makes  modifications  of  any  kind,  the 
negotiations  do  not  constitute  an  acceptance,  but  are 
in  themselves  a  new  offer  and  are  in  like  manner  sub- 
ject to  acceptance  or  rejection.  Since  an  offer  and  an 
acceptance  are  the  essential  elements  of  a  contract, 
tlie  purchaser  should  see  that  the  negotiations  are 
conducted  with  some  definite  understanding.  The 
purchaser  should  clearly  distinguish,  in  his  dealings 
with  the  seller,  between  definite  proposals  the  accept- 
ance of  which  would  constitute  a  contract,  and  others 
which  are  only  tentative  in  their  nature. 

Changes  in  Contracts. — As  it  is  assumed  that  when 
formally  written  up  and  executed  the  order,  or  con- 
tract, embodies  and  conveys  the  true  meaning  and  in- 
tent of  the  offer  and  acceptance,  it  follows  that  the 
order  is  irrevocable  except  by  mutual  consent. 


94 


PURCHASING  AND  STOKING 


THE  CONTRACT 


95 


Should  any  modifications  be  desired  by  either  parly 
they  can  be  effected  by  the  cancellation  of  the  con- 
tract and  the  forming  of  a  new  one  on  the  basis  of 
the  new  understanding,  or  in  most  eases  it  is  suffi- 
cient to  follow  the  procedure  by  which  the  contract 
vv^as  originally  made.  That  is,  one  party  can  make  an 
offer  to  modify  it,  and  can  secure  an  acceptance  from 
the  other  party. 

What  the  Contract  Should  Include. — ^It  is  extremely 
important  that  both  parties  clearly  understand  the 
nature  of  a  contract,  or  order.  I  therefore  give  below 
the  items  that  a  contract  should  include: 

1.  The  date  of  the  contract. 

2.  The  names  of  both  buyer  and  seller. 

3.  The  quantity  of  goods  being  contiacted  for.    It  is 

comparatively  simple  to  state  in  figures  or 
words,  or  in  both,  the  exact  amount  being  pur- 
chased. 

4.  A  proper  definition  of  the  quality,  nature,  charac- 

ter, style,  grade,  or  other  description  that  will 
absolutely  and  positively  identify  the  article  in 
clear,  unmistakable  language.  The  importance 
of  doing  this  has  been  emphasized  in  Chai)ter 
II,  and  will  be  further  discussed  in  the  suc- 
ceeding pages. 

5.  The  time  when  delivery  is  required. 

6.  The  place  at  which,  it  is  agreed,  delivery  shall  be 

made. 

7.  The  price  to  be  paid  by  the  buyer.     There  are  two 

methods  in  general  use  for  naming  a  price.    It 


is  done  by  stating  either  the  price  per  unit  or  a 
lump  sum  price.  Both  methods  are  compara- 
tively simple— they  have  been  fully  covered  in 
Chapter  IV. 

8.  The  date  of  payment. 

9.  The  method  of  payment,  and  any  special  terms, 

cash  discounts,  and  other  features  agreed  upon. 

Definition  of  Quality,  or  Grade.— Further  discussion 
of  some  of  the  clauses  mentioned  is  essential  to  a 
proper  understanding  of  their  importance.  It  is  an 
implied  condition  of  an  order  issued  in  the  general 
way  that  the  buyer  may  reject  the  goods  if  they  are 
not  of  the  kind  and  description  specified  in  the  order. 
But  he  has  no  remedy  against  the  seller— he  can  only 
reject  the  material  tendered. 
If  the  production  work  of  a  factory  is  absolutely 
^^  dependent  for  its  success  on  the  obtaining  of  a  par- 
ticular grade,  size,  or  weight  of  material,  then  it  is 
essential  that  the  contract  contain  a  positive  promise 
and  undertaking  by  the  seller  to  deliver  such  particu- 
lar grade,  size,  or  weight.  With  this  undertaking  ac- 
cepted by  the  seller,  the  buyer  can  hold  him  for 
damages  for  any  loss  the  latter  may  have  been  put  to 
on  account  of  the  seller's  not  delivering  the  right 
goods.  It  may  be  necessary  in  some  cases  to  secure  a 
warranty  from  the  seller,  which  would  entitle  the 
buyer  to  a  definite  remedy  in  the  event  of  a  failure  on 
the  seller's  part  to  deliver  exactly  the  right  kind  of 
goods.  The  determination  of  quality  in  such  cases 
should  be  decided  by  such  analytical  or  physical  tests 
as  may  be  agreed  on  and  stipulated  in  the  contract. 


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PURCHASING  AND  STORING 


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97 


Time  of  Delivery. — The  time  for  delivery  is  a  very 
serious  matter  in  the  case  of  some  purchases,  and  it 
should  be  clearly  set  forth  whether  delivery  is  re- 
quired in  instalments,  and  at  what  times,  or  whether 
a  total  delivery  is  required  and  th(»  date  of  that  de- 
livery. Prompt  delivery  on  a  certain  date  may  be  a 
matter  of  great  moment  to  the  purchaser — if  he 
does  not  receive  the  material,  he  may  suffer  serious 
losses.  In  such  a  case,  the  buyer  must  see  that  "a 
clause  is  inserted  to  the  effect  that  the  time  of  the 
delivery  is  ''the  essence  of  the  contract,"  and  that  in 
the  event  of  failure  to  deliver  on  the  specified  date, 
the  buyer  may  cancel  the  contract  and  purchase  else- 
where. 

Sometimes  it  may  be  necessary  to  include  a  clause 
providing  that  if  the  material  is  not  delivered  on 
time,  the  seller  shall  be  liable  to  pay  to  the  buyer  a 
certain  fixed  amount,  usually  designated  ''liquidated 
damages."  Such  damages,  however,  are  not  enforce- 
able against  the  seller  by  way  of  punishment  for  non- 
delivery. It  must  be  shown  that  the  purchaser  has 
sustained  actual  loss  on  this  account. 

Place  of  Delivery. — The  question  of  transportation 
charges  is  often  an  important  factor  in  the  cost  of 
material.  It  is  essential,  therefore,  for  the  buyer  to 
secure  from  the  seller  all  the  concessions  and  ad- 
vantages he  possibly  can.  It  must  be  borne  in  mind 
that  the  place  of  delivery,  or  the  f.  o.  b.  point,  is 
where  the  ownership  of  the  goods  passes  from  seller 
to  buyer.  If  the  agreement  is  "f.  o.  b.  point  of  ship- 
ment," and  the  goods  are  lost  or  damaged  in  transit, 
the  buyer  must  nevertheless  pay  for  them,  although 


he  has  never  seen  them  or  had  physical  possession. 
His  only  remedy  lies  in  a  claim  against  the  transpor- 
tation compOT. 

On  account  of  the  fact  that  this  condition  governs 
the  transfer  of  ownership,  every  buyer  would 
naturally  prefer  placing  all  orders  on  the  basis  of  de- 
livery being  made  by  the  seller  to  the  buyer's  factory, 
or  to  the  destination  where  the  material  is  to  be  used. 
The  attitude  of  the  sellers,  however,  renders  this  im- 
possible of  accomplishment.  It  is  therefore  obliga- 
tory on  the  buyer  to  secure  all  the  concessions  pos- 
sible, if  he  desires  to  close  the  transaction  on  the 
most  economical  basis. 

When  a  purchase  can  be  made  "f.  o.  b.  destina- 
tion," then  the  buyer  should  insist  on  the  seller's  pre- 
paying transportation  charges.  This  is  important  be- 
cause if  the  freight  is  paid  by  the  purchaser,  he  has 
to  provide  finances  for  this  purpose,  and  there  is  the 
attendant  clerical  work  of  checking  freight  bills  and 
having  in  force  an  infallible  system  by  which  these 
charges  are  debited  to  the  seller. 

Many  transactions  are  closed  on  the  basis  of  **f.  o. 
b.  point  of  shipment,"  with  partial  freight  allowance 
or  full  freight  allowance  to  destination.  This  is  done 
by  the  seller  to  relieve  himself  of  responsibility  for 
the  material  in  transit;  it  also  enables  him  to  meet 
the  competition  of  other  sellers  who  are  more  favor- 
ably situated  geographically.  Even  in  those  cases  in 
which  arrangements  are  made  "f.  o.  b.  point  of  ship- 
ment," with  no  freight  allowance,  it  is  sometimes  pos- 
sible to  induce  the  shipper  to  prepay  freight.  If  a 
purchaser   can   make   such   an   arrangement   he   has 


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99 


gained  an  important  concession,  for  he  is  getting  the 
seller  to  carry  and  finance  his  freight  bills. 

Terms,  and  Time  of  Payment. — When  any  one  is 
negotiating  for  a  purchase,  the  price  is  naturally  the 
main  consideration  and  the  point  on  which  the  greatest 
stress  is  laid,  but  there  are  some  minor  points  con- 
nected with  every  order  placed,  to  which  attention 
should  be  directed.  Although  they  are  subsidiary  to 
the  major  point,  it  must  not  be  inferred  that  they  are 
of  little  importance.  In  many  cases  it  will  be  found 
that  even  if  these  points  are  secondary,  many 
economies  in  buying  can  be  effected  through  a  study 
of  them.  In  short,  no  good  buyer  can  afford  to  ignore 
them,  for  they  may  have  an  important  influence  on  the 
merits  of  his  purchases  and  on  the  efficiency  of  the 
service  that  he  is  able  to  render  his  concern. 

In  spite  of  the  fact  that  in  connection  with  certain 
lines  of  goods  and  in  certain  trades  there  are  estab- 
lished rules  and  terms  which  are  supposed  to  be 
strictly  adhered  to,  nevertheless  they  are  deviated 
from;  and  in  other  transactions,  in  which  no  fixed 
rules  abound,  the  buyer  and  seller  are  always  free  to 
arrange  terms.  This  fact  goes  far  toward  detei*min- 
ing  the  economy  of  a  purchase,  and  large  use  can  be 
made  of  it  by  the  purchaser  in  closing  a  negotiation. 
For  this  reason,  a  study  of  this  feature  is  essential 
to  good  buying. 

Any  establishment  that  is  in  a  strong  financial 
position  can  effect  savings  by  taking  advantage  of  all 
cash  discounts  secured  by  the  purchasing  agent,  and 
can  at  the  same  time  place  a  strong  weapon  in  the 
agent's  hands  by  enabling  him  to  conduct  his  nego- 


tiations on  the  assured  basis  of  the  cash  being  ready 
at  any  moment  to  take  care  of  the  obligations  he  is 
incurring  for  the  concern.  A  knowledge  of  this  fact 
will  naturally  attract  the  best  there  is  in  the  market, 
and  will  save  the  purchaser  the  considerable  work  of 
searching  for  sources  of  supply.  Another  advantage 
is  that  whenever  there  is  a  bargain  to  be  offered  for 
sale,  it  will  undoubtedly  be  presented  first  to  those 
houses  that  are  in  the  best  financial  position. 

It  would  seem,  then,  that  the  buyer  who  is  not 
backed  up  with  substantial  finances  is  laboring  under 
great  disadvantages.  To  a  certain  extent  he  is,  but 
this  is  a  reason  why  he  should  use  greater  energy  and 
put  forth  every  endeavor  to  secure  terms  fully  as  ad- 
vantageous as  those  secured  by  his  more  favored  con- 
temporary. This  cannot  always  be  done,  but  by 
mean?  of  skilful  trading  and  clever  and  judicious 
negotiating  much  can  be  accomplished.  A  purchas- 
ing agent  who  is  placed  in  such  a  position,  and  who 
is  able  to  secure  for  his  company  the  best  terms,  is 
indeed  a  valuable  asset. 

It  is  not  the  regular  terms  recognized  and  allowed 
in  many  lines  of  business  that  I  wish  to  emphasize. 
It  is  assumed  that  these  can  be  obtained  by  every 
purchasing  agent,  practically  without  asking,  but  it 
is  when  special  purchases  are  made  and  special  terms 
arranged,  and  when  better  terms  can  be  secured  than 
those  generally  recognized  as  regular,  that  an  actual 
saving  is  made. 

The  time  element  is  also  an  important  factor,  par- 
ticularly with  those  concerns  that  work  on  a  limited 
amount  of  capital.     In  such  cases  a  buyer  can  be  of 


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101 


considerable  value  if  he  can  arrange  payments  on  long 
time;  but  if  this  has  to  be  done  at  a  sacrifice  of  price 
or  cash  discount,  no  saving  will  be  effected.  It  is 
therefore  of  paramount  importance  to  secure,  first,  the 
lowest  price,  and  then  the  longest  time  or  the  largest 
cash  discount.  After  every  possible  concession  in  the 
matter  of  time  and  discount  has  been  secured  from 
the  seller,  a  review  of  the  financial  position  of  the 
buying  concern  will  determine  on  what  basis  to  close 
the  negotiation.  If  facilities  are  available  for  bor- 
rowing money  at  the  usual  recognized  commc^rcial 
rates,  it  will  invariably  be  found  tliat  it  is  economi- 
cally advantageous  to  borrow,  and  to  secure  the  cash 
discount  rather  than  buy  on  extended  time. 

A  study  of  these  various  problems  is  a  science,  and 
even  small  establishments  may  derive  considerable 
benefit  by  giving  close  attention  to  them. 

Cash  Discounts. — Discussions  have  taken  place  in 
regard  to  cash  discounts,  and  tentative  movements 
have  been  initiated  with  the  object  of  entirely  elimi- 
nating such  discounts,  but  very  little  has  been  ac- 
complished in  the  way  of  making  the  practice  uniform 
throughout  all  classes  and  sections  of  business,  al- 
though in  some  lines  it  has  been  put  into  effect  and 
rigidly  adhered  to.  Opinions  differ  greatly  as  to  the 
wisdom  of  the  entire  elimination  of  cash  discounts, 
but  there  is  one  positive  conclusion:  namely,  that  if 
all  cash  discounts  were  abolished  and  all  goods  sold 
on  the  basis  of  payment  in,  say,  thirty  days,  some 
concerns  could  pay  but  others  could  not.  The  result 
would  be  that  those  that  could  not  would  be  penalized 
to  the  extent  of  what  it  would  cost  them  to  borrow 


the  money  from  their  banks  to  make  the  payments. 
This  drawback  might  not  be  so  expensive  as  the  loss 
of  cash  discounts  under  the  present  system,  but  it 
would  be  a  heavy  handicap. 

Buyers,  however,  have  to  deal  with  the  conditions 
as  they  are,  and  not  \4bh  a  theory.  It  is  well,  there- 
fore, to  note  a  few  instances  of  what  it  actually  means 
lO  a  business  when  cash  discounts  can  be  arranged 
with  the  seller.  Granted  that  thirty  days  is  the  net 
time  for  payment,  if  the  seller  is  willing  to  allow  one 
half  of  one  per  cent  for  cash  in  ten  days,  it  means 
that  he  is  willing  to  forego  this  percentage  to  obtain 
his  money  twenty  days  earlier,  which  is  equivalent 
to  over  9  per  cent  a  year,  one  per  cent  for  the  same 
period  is  just  double  this,  and  two  per  cent  is  over  36 
per  cent  a  year.  If  the  net  time  is  60  days,  these  per- 
centages, of  course,  decrease  materially  but  are  still 
an  important  item. 

It  would  seem  that  these  illustrations  prove  con- 
clusively that  important  savings  can  be  effected  by 
borrowing  money  at,  say,  six  per  cent  in  sufficient 
amount  to  pay  all  bills  less  the  cash  discount.  But 
the  fact  must  not  be  overlooked  that  the  precise 
amount  cannot  be  borrowed  for  the  exact  time  be- 
tween the  discount  date  and  the  maturity  date  of  an 
invoice.  Therefore  a  certain  amount  of  borrowed 
money  will  be  idle,  but  not  in  sufficient  amount  to 
offset  the  advantages  gained. 

Probably  no  business  custom  has  given  rise  to  more 
arguments  and  discussions  than  that  of  giving  cash 
discounts.  Strenuous  attempts  have  been  made  by 
some  to  abolish  the  custom  entirely,  and  by  others  to 


102 


PURCHASING  AND  STORING 


THE  CONTRACT 


103 


perpetuate  it.  Many  claim  that  siieh  a  diseount  con- 
stitutes a  price  concession  by  the  seller,  others  that  its 
use  should  be  retained  because  it  is  a  valuable  aid 
in  making  collections.  Some  claim  that  the  discount 
is  a  benefit  to  the  small  trader  and  manufacturer  be- 
cause  he  can  by  means  of  it  git  his  money  m  quickly 
for  goods  sold  and  turn  his  capital  over  oftener  than 
if  he  received  no  discount.  In  o])position  to  this 
argument,  it  is  claimed  that  the  tliscount  benefits 
large  buyers  only,  because  they  are  generally  \n  a 
position  to  take  advantage  of  the  cash  discounts, 
while  a  smaller  buver  is  not. 

However  the  custom  of  granting  a  cash  discount  is 
considered,  there  is  no  doubt  tliat  it  is  greatly  abused. 
Nevertheless  it  exists,  and  certainly  the  purchasing 
agent  cannot  ignore  it.  It  is  sometimes  called  a  form 
of  price-cutting;  if  it  is,  then  the  purchasing  agent  is 
entitled  to  the  credit  of  getting  the  concession. 

The  question  is  receiving  so  much  attention  ])nn- 
cipally  because  of  the  abuse  of  the  privilege  thai  is 
involved.  But  as  soon  as  the  word  *' privilege''  is 
used  the  question  is  raised  as  to  whether  the  discount 
is  a  privilege  or  price  concession.  The  usual  cash  dis- 
count is  equivalent  to  a  very  excessive  rate  of  annual 
interest,  and  for  this  reason  it  is  not  to  be  supposed 
that  any  seller  labors  under  the  illusion  that  he  gives 
a  cash  discount  to  aid  his  collections.  No  business 
man  would  sacrifice  18  per  cent  a  year  for  this  ob  j(»ct. 
Perhaps,  after  all,  the  only  cash  discount  that  is  fair 
in  principle  is  that  of  a  fair  rate  of  interest  for  antici- 
pated payment.  The  discussion  could  be  continued 
almost  indefinitely.     The  abuses  which  exist  are  not 


caused,  as  a  rule,  by  the  purchasing  agent,  but  by 
those  responsible  for  the  finances  of  a  concern,  I 
shall  say  more  on  this  phase  of  the  subject  when  1 
treat  the  subject  of  invoices. 

From  the  purchasing  agent's  point  of  view,  since 
the  custom  exists  he  should  get  the  best  terms  he  can 
obtain,  irrespective  of  whether  it  is  designated  a  cut 
in  price,  a  price  concession,  or  a  privilege  graciously 
extended  by  the  seller.  But  he  should  remember  this 
—nothing  is  gained  by  inserting  in  the  order,  or  con- 
tract, any  mention  of  the  discount.  He  must  make 
some  provision  for  taking  advantage  of  it,  by  getting 
invoices  approved  promptly.  Moreover,  he  must  not 
overlook  the  fact  that  if  the  material  has  to  come 
some  distance  it  may  be  necessary,  in  order  to  secure 
the  cash  discount,  to  pay  the  invoice  before  he  re- 
ceives the  material. 

When  the  terms  of  an  order,  or  contract,  are 
definitely  agreed  upon,  neither  party  has  any  right  to 
modify  or  change  them.  They  should  be  just  as 
strictly  adhered  to  as  the  unit  price.  It  is  a  common 
practice  of  some  firms  to  deduct  cash  discounts  after 
the  agreed  date,  and  of  others  to  pay  an  invoice  sixty 
(lays  from  the  date,  instead  of  thirty  as  agreed. 
These  derelictions  react  upon  the  buyer,  and  curtail 
the  efficiency  of  the  service  that  a  purchasing  agent 
can  render  his  concern,  because  they  have  a  decided 
effect  on  the  attitude  which  the  seller  adopts  in  his 
dealings  with  the  buyer. 

Contracts  and  Orders.— Throughout  this  chapter  I 
have  referred  to  contracts  and  orders  as  if  the  terms 
were  synonymous  and  represented  exactly  the  same 


104 


PURCHASING  AND  STORING 


THE  CONTRACT 


105 


thing.     This  is  true  to  a  large  extent,  but  there  ia  a 
distinction.    All  the  points  that  have  been  discuHsed 
apply   equally   to    any   agreement    reached   between 
buyer  and  seller,  irrespective  of  its  final  form.    It 
may  have  been  entirely  verbal,  or  it  may  have  Ix^en 
represented  in  the  documentary  form  of  an  order  or 
contract— the  distinction  lies  in  the  written  forms.    A 
contract  form,  in  duplicate,  is  signed  by  both  parties 
to  the  transaction.     An  order— which  appears  on  an 
order  form— is  really  a  ''command''  from  the  buyer 
to  the  seller  to  proceed  to  make,  ship,  or  deliver  cer- 
tain  goods  for  which  the  buyer  has  received  a  quota- 
tion.   In   other   words,   it   is   an   acceptance   of   the 
seller's  offer.     The  quotation  and  the  order  constitute 
the  contract.     The  virtue  of  this  method  lies  in  the 
ease  and  simplicity  of  its  execution.    It  is  universally 
adopted,  except  in  those  cases  already  alluded  to,  in 
which  the  transaction  is  more  intricate  and  involved 
and  demands  an  elaboration  in  written  evidence. 

No  matter  what  form  the  documentary  evidence 
takes,  the  fact  remains  that  every  arrangement  or 
agreement  made  between  buyer  and  seller  is  a  con- 
tract, and  is  in  force  until  carried  out  in  accordance 
with  its  terms,  or  until  mutually  abrogated. 

Contract  Forms.— As  already  stated,  what  is 
usually  designated  as  a  contract  is  drawn  up  in  such 
a  manner  as  to  require  on  the  document  the  signa- 
tures of  both  parties.  This  form  is  very  largely  used 
by  industrial  establishments  for  what  are  generally 
called  ''blanket  orders."  This  term  is  self-explana- 
tory. The  blanket  order  literally  covers  the  buyer's 
requirements,  or  part  of  them,  over  a  certain  period, 


and  delivery  of  the  material  can  be  called  for  by  the 
buyer  at  will,  or  at  definite  times  stated  in  the  con- 
tract. 

These  blanket  orders  have  many  advantages  and 
can  be  drawn  in  many  forms.  Some  of  the  advan- 
tages are:  protection  in  the  matter  of  price  for  the 
period  covered;  generally  the  securing  of  a  better 
price  than  for  separate  purchases;  a  saving  in  time  in 
not  having  to  secure  quotations  for  each  individual 
item;  greater  uniformity  in  quality,  because  the  sup- 
ply comes  entirely  from  one  source.  Depreciation  in 
price  during  the  contract  period  is  an  important  ques- 
tion in  all  blanket  contracts,  and  should  have  the 
buyer's  serious  consideration.  In  most  cases  it  is  not 
difficult  to  obtain  protection  against  this  from  the 
seller.  By  a  study  of  market  conditions,  as  discussed 
in  the  last  chapter,  large  use  can  be  made  of  this 
method  of  buying  on  an  advancing  market,  but  more 
care  should  be  exercised  at  other  times. 

These  contracts  are  of  so  many  kinds,  or  rather 
there  are  so  many  ways  in  which  they  can  be  drawn 
to  accord  with  any  agreement  reached,  that  it  is  im- 
possible to  give  illustrations  of  all  of  them.  One 
form,  given  in  Figure  15,  will  suffice  to  indicate  their 
general  character.  The  following  is  a  brief  descrip- 
tion of  some  of  those  more  commonly  used: 


1. 


2. 


3. 


The  buyer  agrees  to  take  all  his  requirements 
during  the  period  named. 

The  buyer  agrees  to   take  part  of  his  require- 
ments. 

The  seller  agrees  to  furnish  a  stipulated  quantity, 


106 


PURCHASING  AND  STORING 


JOHN  Smith  Mfg.  Co. 

S^LES  CONTRACT  IN  DUPLICATE  loo  tern  ave  n.y  , 


QUANTITV 


OCSCRIPTION 
AND  PRICCS 


TERMS  OF 
PAVMCNT 


SPCCin- 

CATION8 


ocuvcRies 


CUAnANTV 


CONDITIONS 


JOHN  SMITH  MFG.  CO.  hereby  «ells  and  Ihe^^— 


of 


iState  of - 


ptirebasos  and  agrees  to  receive  and  pay  (or'tbe  follow  inR  at  tlie  piicek  and  upon  tlie' terms  herein  spcnll* 

subject  to  the  conditions  herein  expressed,  to  be  «pccifie<l  for  between 

.^_^^^_^_____^^_^^  the  expiration  date  of  contract,  not  to  exceed  _^_____^^^______^^ 


nor  to  be  less  than, . 


of  material  within  the  limits  and  of  the  sixes  manufactureil  by  seller  antl  Mibject  to  seRer^s  staoilard  manuu> 
variations,  classiflcalions  and  eitras. 


.  freight  rale  si.li)(  ct  to 
.to  des'iDjftion, 


The  price  or  prices  quoted  herein  are  based  upon  the  publiiihed  ___^___^ 

prescribed  minimum  weights,  lengths,  and  minimum  charges  from 

lawfully  in  effect  at  date  of  this  agreement,  vii. 

cents  per  100  lbs.  No  freight  allowance  iu  excess  of  actual  weight  to  be  ivisde.  Shipments  of  less  than  HA  Hms  'o  he" 
invoiced  f.  o.  b.  Seller  s  mill.  In  event  of  an  increase  of  such  freight  rati-  M.t'  amount  of  such  increase  hhall  Ix-  addi-cl 
to  the  price  of  all  materials  shipped  against  this  contract  during  ihi-  pen  .1  in  which  such  increased  rale  is  lu  efect, 
and  in  event  of  a  decrease  in  such  freight  rate  the  amnunt  of  such  deon  i-.'  shall  he  deducted  from  tbe  price  "»f  all 
oiaterials  shipped  hereunder  during  the  period  in  which  such  decreased  r:tK  is  io  effect. 


Terms  . 


from  dale  of  invoice,  payable  in  Fiitsburg.  New  York  or  Chicago  luotia. 

In  case  buyer  shall  fail  to  make  tiayments  in  accordance  with  th.-  lerms  and  provisions  of  this  agte'-ment, 
seller  may  defer  further  shipments  until  such  payments  are  made,  or  may  at  its  option,  terminate  this  agiet-iMenl. 
Shipmenu  and  deliveries  under  this  agreement  shall  at  all  times  be  sulrjeet  to  the  approval  of  Seller'a  t  redit 
Department;  and,  in  case  sellrr  shall  have  any  doubt  a>  to  Buyer's  res|nii.sibility.  Seller  may  decline  to  maltr  any 
shipments  hereunder  except  upon  receipt  of  satisfactory  secunty  or  for  i  ash  before  shipment.  Termination  of  the 
contract  under  any  of  these  coitditions  shall  not  prejudici^  any  claim  tor  damages  tbe  seller  may  be  entitled  Io  n  aie 

All  transportation  charges  to  be  paid  in  cash  by  buyer. 

Specifications  in  detail  shall  be  furnished  to  the  Seller  in  substantially  equal  monthly  quantities  begisniogf 
—  day  of : 19_ 


Tbe  Buyer's  failure  to  fuoiijli  •(n-iinv.ttions  as  ap^wioted  may,  at  s,  Iter's  option  without  notice  to  Buyf  r,  be 
treated  and  considered  as  a  refusal  to  sppcily  and  receive  the  unspei  ill  •  I  portion  of  the  monthly  quota  Final 
speciflcationa  due  under  this  coolraci  to  lie  in  the  hands  ol  the  Seller  at  li  .^I  thirty  days  piior  to  the  expiration  date 
of  this  contract.  The  seller  shall  afford  at  its  works  reasonable  facilitu  -  lor  inspection  and  tests  of  material  when 
sold  and  accepted  subject  to  ii><p<»clion  Inspection  and  acceptance  at  'i  ilcr's  works  shall  t>e  final.  Shipiuevta  to 
he  made  as  soon  after  receipt  of  specifications  as  condition  of  seller's  plant  will  permit. 


Qoodi  to  be  delivered  f.  «.  b.  cars  at 
consigned  to 


The  Seller  agrees  to  replace  material  found  defective  for  the  purpose  for  which  it  is  sold,  when  in  the  Imiiin  of 
tbe  buyer,  but  will  not  allow  or  pay  any  claims  of  any  n,itiire  wliatsoivi  i  ic.sulting  from  tbe  use  of  such  d-li  -live 
material.  In  all  cases  full  opportunity  shall  be  give  n  for  investigatiou  by  Msller'*  representatives.  Goods  mni*  uot 
be  returned  except  by  written  permission  of  the  seller. 

The  Seller  shall  not  be  liable  for  non- performance  of  this  contract  in  whole  or  in  p.irt.  if  such  nmipcifirm  nice 
is  the  result  of  fires,  strikes,  differences  with  employes,  casualties.  d'lj>s  in  transportation,  short.iKe  o(  ta^s  or 
other  causes  beyond  the  Seller's  reasonable  control;  nor  shall  these  ext  motions  be  litnitcd  or  waiv<-d  by  au)  'thir 
terms  of  this  contract,  whether  printed  or  written  Th**  quantity  of  m;.''  rial  shown  by  invoice  shall  id  all  .  ascs 
govern  settlements,  unless  notice  of  shortage  be  immediately  reported  lo  the  agent  of  the  di-livering  railroai.  in 
order  that  the  alleged  shortage  may  be  verified  and  unless  like  notice  b.  given  to  the  seMer  within  i4  bonri  sfter 
receipt  of  material.  Claims  fur  other  errors,  deficiencica  or  imperfections  will  not  be  entertained  by  tbo  teller 
unless  made  withio  16  days  after  receipt  of  mat«riaL 


ACCEPTED: 


ACCEPTED  SUBJECT  TO  APPROVAL 


yiG.  15.     ^ORM  OF  CONTRACT 


THE  CONTRACT 


107 


5. 


6. 


with  no  binding  obligation  on  the  buyer's  part 
to  take  any  definite  quantity. 

The  price  may  be  a  fixed  one  for  the  whole  period. 

The  price  may  be  on  a  sliding-scale  basis,  increas- 
ing or  decreasing  in  a  ratio  proportionate  to 
quantities  taken. 

The  price  may  be  at  a  percentage  below  the  cur- 
rent market  when  material  is  taken. 

In  each  of  these  instances  the  material  mav  be 
taken  in  one  shipment  or  in  many;  if  it  is  taken  in 
one  shipment  the  transaction  could  in  many  cases  be 
effected  through  a  regular  order.  What  is  of  primary 
concern  to  the  purchasing  agent  is  the  proper  in- 
sertion in  the  written  document  of  all  the  clauses 
necessary  to  cover  the  agreement  he  has  made  with 
the  seller;  he  should  concentrate  his  attention  on 
these  clauses  before  signing  the  contract.  If  inspec- 
tion is  to  be  made  at  the  seller's  factory  during  the 
time  of  the  manufacturing  process,  or  if  chemical  or 
physical  tests  are  to  be  made  then  or  subsequently, 
the  contract  should  be  drawn  to  incorporate  them. 

When  a  contract  covers  many  shipments  over  a  long 
period,  the  best  way  to  deal  with  them  is  to  issue  for 
each  shipment  a  regular  order  which  shall  contain  a 
clause  to  the  effect  that  it  is  on  account  of  contract 

dated .    The  following  up,  invoice  work,  and  other 

details  are  then  kept  in  conformity  with  other  routine 
work;  these  I  shall  discuss  under  that  heading  in  a 
later  chapter. 

Regular  Orders.— Under  what  may  be  classed  as 
i<^*gular  orders  are  included  the  majority  of  purchases 


108 


PURCHASING  AND  STORING 


THE  CONTRACT 


109 


for  industrial  purposes.  In  those  instances  in  which 
failure  on  the  part  of  the  seller  to  live  up  to  the 
agreement  would  involve  serious  consequences  for  the 
purchaser,  it  is  advisable  to  send  the  order  in  duj)!!- 
cate,  and  to  insist  that  the  seller  write  his  formal  ac- 
ceptance on  the  face  of  one  copy  and  return  it  to  the 
purchaser.  Examples  of  forms  for  these  orders  are 
given  in  Figures  16  and  17.  It  is  essential  that  the 
nine  cardinal  points  mentioned  earlier  in  this  chapter, 
as  well  as  all  other  pertinent  information,  be  embodied 
in  the  order. 

As  previously  stated,  an  order  that  is  issued  in  ac- 
ceptance of  a  proposal  made  to  the  buyer  serves  to 
complete  the  contract,  provided  the*  order  does  not 
deviate  from  the  offer  in  any  particular.  An  order 
which  is  issued  by  the  purchaser,  and  which  does  not 
come  within  the  last  named  category,  is  simply  an 
offer  to  the  seller;  an  acknowledgment  is  therefore 
necessary  for  the  completion  of  the  contract.  Some 
purchasing  departments  issue  a  great  many  of  these 
orders — it  must  be  left  to  the  individual  cases  to  de- 
termine whether  acknowledgments  should  be  required, 
and,  if  so,  when. 

Many  order  forms  have  the  text  of  the  conditions 
printed  on  the  reverse  side.  In  such  cases  it  is  essen- 
tial to  refer  in  the  body  of  the  order  to  these  condi- 
tions, in  some  such  phrase  as  this:  ^*This  order  is 
issued  subject  to  the  conditions  on  the  back  hereof.'' 
If  there  is  no  reference  to  these  conditions  within  the 
space  which  could  be  considered  a.s  containing  the 
essential  facts  of  the  order,  the  seller  is  not  obligated 
to  read  and  interpret  them  as  part  of  the  contract. 


All  Invoices,  correspondence  and  packages  must  bear  this  ORDER  No. 


JOHN  SMITH  MFG.  CO. 

too  SIXTEENTH  AVE. 
NEW   YORK 


ORIGINAL 


To 


Please  enter  our  order  for 


Price. 


John  Smith  Mfg.  Co. 


Ship  Via . 
F.  0.  B  - 


Purchasing  Agent 


We  will  not  be  responsible  for  goods  delivered  to  us  with  out  a  written  order. 
Please  acknowledge  receipt,  and  advise  when  shipment  will  be  made 


FIG.  16.      ORDER  FORM 

''Rush"  Orders. — Some  of  the  expressions  used  in 
connection  with  *'rush"  orders  are:  **The  'bete  noir' 
of  a  purchasing  department;  ''A  necessary  evil;" 
*' There  should  be  none."  Every  rush  order  means  a 
rush  price  or  no  price  at  all.  The  barriers  carefully 
f^iected  against  paying  high  prices  are  swept  away. 
I^<'cause  somebody  has  blundered!  No,  not  always. 
There  can  be  legitimate  rush  orders,  and  it  is  the 
^hity  of  the  purchasing  department  to  be  prepared  for 


110 


PURCHASING  AND  STOIUNG 


JOHN  SMITH  MFG.  CO. 

too  SIXTEENTH  AVE. 
NEW  YORK 


Put  this  Order  No 
on  Vour  Invuict 


To. 


Please  detach  and  return  ackruMvledgment  at  foot 


Quantity 


Description 


Price 


Ship  Via.. 
F.O.B.— 


John  Smith  Mfg.  Co 


Purchasing  Agent 


Detach  and  mail  at  once  to 
JOHN  SMITH  MFG.  CO. 
100  Sixteenth  Ave. 
New  York 


Order  No. 
Date 


. 


Receipt  of  Order  numbered  as  above  is  hereby  acknowledged. 
We  accept  the  order  as  specified 

Shipment  will  be  made. 
Signed . 


FIG.    17.      ORDER  FORM,  WITH  ACKNOWLEDGMENT  SLIP  ATTACH HED 

For  those  orders,  for  which  acknowledgments  are  essential,  this  is  the 

surest  way  of  getting  them  and  brings  better  results  than 

separate  acknowledgment  forms. 

tliem.  This  state  of  preparedness  consists  in  knowing 
sources  of  supply  and  in  having  a  thorough  knowl- 
edge of  prices.  These  phases  of  the  subject  were  dis- 
cussed in  the  second  and  third  chapters. 

Such  orders  may  originate  through  the  necessity 
that  the  manufacturing  department  produce  on  short 
notice  some  contract  closed  by  the  sales  department 


THE  CONTRACT 


111 


with  a  time  limit  clause.  Even  if  there  have  been 
lax  methods,  or  lack  of  anticipation,  on  the  part  of 
another  department,  still  the  purchasing  department 
is  in  existence  for  the  general  good  of  the  organiza- 
tion and  should  exert  all  its  energies  to  do  the  best 
under  the  circumstances.  If  it  is  a  case  in  which  in- 
telligent anticipation  would  have  obviated  the  rush 
order,  it  is  certainly  part  of  the  purchasing  agent's 
duties  to  call  the  matter  to  the  attention  of  the  proper 
authority.  Buying  on  sane,  careful  principles  should 
be  insisted  upon,  and  the  purchaser  should  work  for 
the  elimination  of  all  those  factors  that  tend  to  nullify 
or  destroy  these  principles.  This  is  the  purchaser's 
view  of  the  cost  situation  in  an  industrial  plant. 

*  Tick-Up'*  Orders. — A  great  deal  of  what  has  been 
said  under  rush  orders  could  apply  to  '* pick-up"  or- 
ders, but  there  are  some  other  considerations  also. 
There  are  times  when  a  mill  shipment  is  delayed  from 
one  or  another  of  manv  causes — excessive  demand, 
strikes,  break-down  of  transportation,  and  so  on.  In 
such  instances  it  is  necessary  to  **pick  up'"  from 
warehouse  stock  sufficient  material  to  keep  the  series 
of  factory  operations  unbroken.  An  advanced  price 
must  undoubtedly  be  paid,  and  in  keeping  this  at  a 
minimum  the  purchasing  agent's  price  knowledge 
again  comes  into  play. 

Another  class  of  pick-up  orders  is  in  connection 
with  small,  picayune  purchases  which,  taken  alone, 
would  be  declined  bv  even  the  smallest  of  the  dealers 
and  supply  houses,  but  which,  in  conjunction  with 
other  business,  help  to  make  a  fairly  respectable  ac- 
count for  some  merchants  and  jobbers. 


112 


PURCHASING  AND  STORING 


The  main  evil  of  small  pick-up  orders  is  well  illus- 
trated in  a  letter  to  a  technical  publication  from  *'A 
Victim."  He  relates  that  he  received  a  pick-up  or- 
der from  a  large  corporation  for  two  dozen  cotter 
pins.  A  price  of  $1.50  was  agreed  upon  when  the  or- 
der was  telephoned.  The  company's  order  called  for 
shipment  to  an  outlying  branch  by  parcel  post.  A 
copy  of  the  invoice  and  of  the  original  shipping  list 
was  to  be  mailed  to  the  branch,  and  the  invoice  in 
quadruplicate  with  a  copy  of  the  shipping  list  was  to 
be  mailed  to  head  office. 

The  clerk  responsible  for  checking  the  price  on  the 
invoice  was  under  the  impression  that  it  was  too  high, 
and  therefore  obtained  quotations  from  two  other 
houses.  Both  of  these  quotations  were  lower  than  the 
shipper's  price.  Armed  with  this  information,  he 
opened  fire  on  the  dealer  and  after  four  letters  had 
been  written  and  despatched  by  each  of  the  comba- 
tants, the  dealer  capitulated  and  reduced  his  charge 
to  a  figure  in  line  with  the  other  quotation  he  had  re- 
ceived. 

In  the  case  recited,  perhaps  several  times  the 
amount  of  the  saving  was  spent  by  the  purchaser  in 
securing  the  adjustment.  The  remedy  for  such  a  con- 
dition lies  in  dealing  with  tried  and  reputable  supply 
houses.  A  house  that  habitually  renders  invoices  con- 
taining overcharges  is  not  safe  to  do  business  with. 
The  ultimate  cost  of  purchased  goods  is  not  repre- 
sented by  figures  on  an  invoice.  Possibly  the  example 
given  is  an  exaggerated  case,  but  it  shows  the  need 
of  common  sense  in  buying  small  quantities  as  well 
as  large. 


THE  CONTRACT 


113 


** Covering    Orders*'    for    Recording    Purposes. — 

** Covering  orders''  are  necessary  to  enable  the  pur- 
chasing department  to  keep  a  record  of  the  charges, 
and  also  to  guarantee  that  invoices  and  bills  of  every 
kind  will  travel  the  same  course  before  reaching  the 
accountant.  They  also  constitute  a  measure  of  pro- 
tection against  duplication  of  payments,  as  I  shall 
explain  in  the  chapter  on  ** Invoices." 

These  *^ covering  orders"  are  written  up  and  in- 
cluded in  the  purchasing  files  for  the  invoices  to  be 
recorded  on  them.  They  consist  chiefly  of  such  items 
as  of  electric-light  bills,  telephone  charges,  and  many 
other  monthly  bills.  Probably  every  purchasing  de- 
partment at  times  receives  bills  for  small  items  ob- 
tained by  some  person  in  the  establishment,  for  which 
no  formal  order  has  been  issued.  Stationery  and 
small  items  of  merchandise  are  sometimes  picked  up 
in  this  way.  These  must  be  covered  by  formal  orders 
for  recording  purposes  only. 

Remedial  Contract  Forms.— The  National  Dry 
Goods  Association  has  appointed  a  committee,  com- 
posed of  both  manufacturers  and  jobbers,  to  discuss 
forms  of  contracts  as  a  remedy  for  some  of  the  anom- 
alies that  now  exist.  The  object  is  so  extremely  per- 
tinent to  the  discussion  of  the  subject  in  this  chapter 
that  I  give  here  the  report  of  the  proposed  meeting 
which  the  New  York  Times  published. 

The  suggestion  of  such  a  meeting  was  made  some  weeks  ago 
by  E.  L.  Howe,  Secretary  of  the  retailers'  organization,  in  a 
statement  calling  attention  to  the  need  of  more  definite  and 
binding  contracts  between  buyers  and  sellers.  Mr.  Howe  said 
there  should  be  a  different  understanding  than  existed  be- 


114 


PURCHASING  AND  STORING 


tween  the  two  parties  as  to  the  obligations  imposed  upon 
both  by  a  contract  for  the  delivery  of  merchandise. 

*'Our  suggestion,  therefore,  is,"  he  said  at  that  time,  *4bat 
immediate  attention  be  given  by  both  the  retail  and  wholesale 
interests  of  the  country  to  a  form  of  contra^-t  for  merchandise 
orders  that  will  place  proper  and  binding  obligations  on  both 
parties  to  it.  As  it  stands  today  the  retailer  is  bound  to  ac- 
ceptance of  the  goods  if  shipped  within  the  specified  time,  but 
the  seller  slips  out  of  his  obligation  as  easily  as  he  slips  out  of 
his  coat.  If  the  seller  cannot  be  tied  definitely  in  the  matter, 
provisions  should  at  least  be  made  for  notification  to  the 
buyer,  at  a  reasonable  time  prior  to  the  stated  delivery,  of  the 
seller's  inability  to  go  through  with  the  contract." 

This  exposition  of  the  buyer's  side  of  the  contract  conti'o- 
versy  brought  a  quick  reply  from  the  manufacturers,  who,  in 
turn,  claimed  to  be  the  parties  with  a  real  grievance.  Many 
instances  were  related  of  the  buyer 's  failure  to  live  up  to  his 
contract  with  the  seller,  of  his  taking  unjustified  discounts, 
returning  goods  without  a  proper  reason,  cancelling  orders 
given  after  goods  had  been  put  into  work,  and  many  other 
abuses.  Many  wholesalers  have  seen  fit,  during  the  prevalence 
of  a  market  in  favor  of  the  seller,  to  correct  some  of  tli(:;e 
evils.  It  was  quite  openly  hinted  that  the  retailers  were  grow- 
ing restless  under  the  necessity  of  strictly  observing  the 
seller's  terms  or  getting  no  merchandise. 

"The  present  tendency  seems  to  be,"  he  said,  "entirely  in 
the  direction  of  binding  the  buyer  and  letting  the  seller  off 
scot  free.  Both  should  be  tied  down  specifically  to  the  per- 
formance of  certain  obligations,  otherwise  there  is  no  contract. 
The  seller  at  present  seems  free  to  deliver  whenever  he  wants 
to,  and  at  any  price  he  cares  to  ask.  Take,  for  instance,  a 
form  of  contract  that  one  importer  is  forcing  his  custonnTs 
to  sign.  We  have  had  copies  of  this  contract  for  distribution 
among  our  members.    Here  are  the  terms  laid  down : 


THE  CONTRACT 


115 


*  Seller  may  delay  or  cancel  all  or  part  of  deliveries  in  case 
of  damage  to  mill,  machinery,  or  stock,  strike,  accident,  or  de- 
lay in  manufacture  or  transportation,  inability  to  deliver  or 
hindrance  by  reason  of  conditions  occasioned  by  war  or  other 
circumstances  beyond  seller's  control. 

'If  conditions  occasioned  by  change  of  tariff  and  United 
States  customs  regulations  or  decisions,  or  by  war  or  political 
disturbance  increase  the  cost  of  raw  material  or  processing 
of  merchandise  to  seller,  buyer  shall  pay  proportionate  in- 
crease in  price  upon  all  merchandise  to  be  delivered. 

'Seller  may  decline  to  make  any  or  all  deliveries,  except 
for  cash,  and  if  buyer  omits  to  pay  cash  for  any  instalment 
upon  the  date  fixed  for  delivery  thereof,  upon  the  offer  of  the 
seller  to  deliver  such  instalment  on  such  date  for  cash,  then 
the  seller  may,  at  his  option,  cancel  as  to  any  or  all  instal- 
ments, or  postpone  deliveries  until  such  time  as  buyer  satisfies 
seller  as  to  his  financial  responsibility,  at  which  time  seller 
may  renew  deliveries  with  such  extension  of  time  as  seller  may 
require  by  reason  of  postponement. 

'Partial  deliveries  accepted  by  buyer  shall  be  paid  for  at 
specified  price  and  terms.  Reasonable  allowance  of  time  from 
delivery  date  specified  shall  be  allowed  seller.  Seller  makes 
no  warranties  surviving  acceptance.  If  any  pieces  delivered 
by  seller  are  imperfect,  buyer  shall,  within  reasonable  time, 
give  seller  reasonable  opportunity  to  replace  such  ])ieces. 

*  Failure  of  seller  as  to  any  instalment  shall  not  affect 
buyer's  obligation  as  to  other  instalments.  If  buyer  fails  to 
accept  any  instalments  when  due,  or  to  make  any  payment 
when  due,  or  to  perform  any  term  of  any  contract  with  seller, 
seller  shall  at  any  time  thereafter  have  the  right  to  cancel  all 
or  any  instalments  of  this  contract.  This  paper  contains  the 
entire  contract.  There  are  no  oral  representations  or  warran- 
ties by  seller  affecting  this  contract.'  " 

"The  provisions  in  this  contract,"  Mr.  Howe  explained- 


116 


PURCHASING  AND  STORING 


''show  what  seems  to  be  lack  of  intention  upon  the  part  of  the 
seller  to  bind  himself  to  any  definite  obligation,  yet  at  the 
same  time  providing  that  the  buyer  shall  be  held  to  a  strict 
responsibility.  Such  contracts  are  not  contracts  in  the  strict 
sense,  because  they  are  one  sided  and  unfair  to  the  buyer. 
Such  forms  represent  a  condition  in  trade  we  hope  to  change 
as  a  result  of  the  coming  conference  between  buyers  and 
sellers.** 


CHAPTER  VI 


DELIVERY 


Importance  of  a  Definite  Delivery  Date, — Probably 

no  phase  of  purchasing  work  requires  more  keenness 
and  close  attention  than  that  connected  with  delivery. 
Very  few  purchases  are  made  for  industrial  establish- 
ments with  an  indeterminite  delivery  date.  Practi- 
cally every  order  issued  is  for  material  or  supplies  re- 
quired at  once,  or  at  least  at  a  fixed  date. 

The  determination  of  the  date  on  which  raw  ma- 
terial is  required,  is  an  important  factor  in  industrial 
economies.  Eaw  material  is  a  form  of  wealth,  and  all 
wealth  is  in  a  stage  of  appreciation,  depreciation,  or 
stagnation.  One  of  the  objects  of  human  activities  in 
industrial  organizations  is  to  increase  the  value  of  the 
raw  material  manipulated.  During  transit,  and  while 
at  rest  in  the  stores,  raw  material  is  considered  to  be 
in  a  state  of  stagnation.  Contemporaneously  with 
these  periods  there  may  be  an  appreciation  in  intrin- 
sic value,  but  this  is  not  the  primary  object  of  pur- 
chasing for  industrial  purposes.  There  may  also  be 
depreciation,  on  account  of  miscalculation  or  from 
causes  beyond  the  control  of  the  buyer. 

Taking  the  form  of  bulk,  needing  storage  space, 
and  being  subject  to  loss  by  fire,  damage  and 
depreciation,  an  expense  is  naturally  involved  in  car- 

117 


118 


PURCHASING  AND  STORING 


rying  any  stock  of  raw  material.  For  this  reason  a 
very  close  approximation  is  necessary  of  tlie  dat«'  on 
which  tlie  material  is  required  by  tlie  production  de- 
partnieiit,  and  of  the  time  that  will  be  consumed  by 
the  purchasing-  department  in  procuring  it.  A  pur- 
chase having  been  made  on  certain  calculations  of 
time  as  one  of  the  principal  factors,  it  is  essential  to 
see  that  these  calculations  do  not  miscarry — other- 
wise the  whole  fabric  of  good  purchasing  might 
collapse. 

Co-operation  Between  Purchasing  and  Production 
Departments. — Since  it  is  the  particular  province  of 
the  purchasing  department  to  be  well-informed  on 
market  conditions,  it  is  obligatory  on  that  department 
to  keep  the  manufacturing  department  posted  on  all 
changes  in  delivery  conditions.  In  times  of  stress  and 
unusual  demand,  it  is  necessary  to  keep  very  close 
watch  on  all  questions  that  would  influence  the  time 
required  to  obtain  raw  materials.  It  may  not  be  ex- 
actly true  that  there  is  perhaps  a  shortage,  or  that 
manufacturers  cannot  make  shipments  as  promptly 
as  when  conditions  are  normal,  but  the  transportation 
problems  must  also  be  closely  studied. 

Purchasing  agents  sometimes  achieve  the  imi)rob- 
able,  but  they  cannot  accomplish  the  impossible.  They 
must  be  given  sufficient  time  to  obtain  raw  material, 
and  due  notice  of  quantities  and  of  time  of  require- 
ment should  be  furnished  by  the  manufacturing  de- 
partment. Co-operation  between  the  two  departments 
is  essential — the  buyer  must  keep  the  shop  acquainted 
with  delivery  conditions.  Foresight  is  the  great  fac- 
tor in  securing  a  supply  of  raw  material  at  exactly 


DELIVERY 


119 


the  right  time.  If  it  is  necessary  to  look  ahead  six 
months  instead  of  two,  it  must  be  done.  The  shop 
should  make  known  its  requirements  at  the  moment 
they  become  known,  and  not  wait  till  the  moment  of 
actual  need. 

If  these  matters  are  not  handled  right,  the  results, 
from  a  purchasing  point  of  view,  are  disastrous. 
Prices  are  shunted  to  one  side,  quality  in  many  in- 
stances is  disregarded,  specifications  are  endowed  with 
elastic  traits,  and  substitutes  of  unknown  calibre  are 
accepted  or  tried  out.  Alt  these  features  are  the  re- 
sult of  lack  of  foresight.  To  the  purchasing  depart- 
ment is  delegated  the  task  of  securing  delivery,  and 
the  production  department  wants  materials  and  sup- 
plies, not  excuses  for  non-delivery. 

Delivery  and  Production  Costs.— Increased  manu- 
facturing costs  are  too  frequently  caused  by  the  ad- 
ditional cost  of  raw  material  which  has  been  bought 
in  a  hurry  from  warehouse  because  mill  shipments 
have  not  arrived  at  the  estimated  time.  If  the  pro- 
duction department  has  been  in  the  habit  of  getting 
certain  raw  material  in,  say,  six  weeks  from  the  time 
it  was  requisitioned,  it  is  a  distinct  shock  to  that  de- 
partment to  discover  suddenly  that  it  will  have  to 
wait,  say,  ten  weeks.  It  should,  however,  be  no  shock 
to  the  purchasing  department  that  has  its  finger  on 
the  pulse  of  the  market. 

All  the  principal  items  used  in  manufacturing 
should  be  scheduled  by  the  purchasing  department, 
and  regular  notification  should  be  sent  to  the  produc- 
tion department  concerning  the  time  required  for  de- 
livery.   Special  notice  should  be  sent  in  regard  to  any 


120 


PURCHASING  AND  STORING 


radical  changes  in  orders.  This  procedure  enables  the 
manufacturing  department  to  specify  its  requirem(^nts 
and  to  prepare  requisitions  early  enough  to  avoid 
tardy  deliveries.  In  discussing  stores  problems  later 
on,  I  shall  say  something  more  with  respect  to  the 
quantities  which  should  be  kept  on  hand,  and  how 
these  quantities  are  governed  by  market  conditions. 

In  some  establishments  in  which  an  article  is 
bought  infrequently,  such  an  article  is  apt  to  be  con- 
sidered unimportant  in  the  general  scheme  of  deliv- 
ery. Eequisitions  will  be  sent  to  tlie  purchasing  de- 
partment for  the  principal  material  lequired  for  turn- 
ing out  a  product,  while  the  order  for  the  article  that 
is  considered  unimportant  is  left  to  be  included  in 
later  requisitions.  As  a  matter  of  fact,  it  may  take 
longer  to  obtain  this  article  than  to  get  the  other  ma- 
terial, and  delay  in  securing  it  will  hold  up  the  com- 
pletion of  the  manufacturing  process.  Such  cases 
need  to  be  watched  carefully  by  the  purchasing  de- 
partment. 

Buying  on  Schedule. — **  Dependent  sequence," 
which  I  have  just  described,  is  nowhere  more  costly 
in  delay  and  inconvenience  than  in  getting  delivery 
of  material  and  supplies,  and  any  follow-up  system 
that  will  bring  together  the  various  units  at  the  right 
moment  are  always  welcome. 

A  suggestion  is  given  in  Figure  18  for  a  time  sched- 
ule for  the  purchase  of  all  materials  and  supplies.  A 
copy  of  this  schedule  should  be  given  to  each  depart- 
ment that  draws  requisitions.  This  form  needs  little 
explanation,  but  it  is  essential  th^t  each  item  be  given 
for   which   there   may  be   requisitions.     No   general 


DELIVERY 


121 


ARTICLE 


Time  required  for  delivery 
if  ordered  from 


Warehouse 


J 


Mill 


Mm.  quantity  which  can 
be  purchased  at  mm.  price 


Warehouse 


J 


Mill 


Special 
Features 


i 


FIG.  18.      LOOSE  LEAVES  OR  CARDS  CAN  BE  USED,  AS  FOUND  MOST 
CONVENIENT,    FOR    COMPILING   THE   SCHEDULE   OF   THE   TIME   RE- 
QUIRED FOR  SHIPMENT.     THIS  SCHEDULE  SHOULD  BE  FURNISHED 
BY  THE  PURCHASING  DEPARTMENT  TO  THE  PRODUCTION 
MANAGER  OR  OTHER  PERSONS  MAKING  REQUISITIONS. 

titles,  such  as  ''Hardware,"  ''Chemicals,"  and  so  on, 
should  be  used.  If  such  a  schedule  is  carefullv  worked 
out  by  the  purchasing  department,  it  will  serve  as  a 
valuable  help  to  all  those  authorized  to  draw  requi- 
sitions. If  the  production  department  maintains 
"control  boards,"  or  diagrams  of  their  operations, 
these  schedule  dates  should  be  transferred  to  the 
hoards  or  diagrams.  The  fixing  of  standard  times  for 
purchasing  and  stores-handling  not  only  allows  the 
purchasing  agent  time  to  bargain,  buy,  and  deliver, 
hut  is  an  important  economic  factor  in  preventing 
over-buying  and  over-stocking.  Barring  accidents 
and  other  unavoidable  causes,  it  also  prevents  delays. 
Transfer  of  Ownership.-— As  explained  in  the  last 
chapter,  ownership  passes  from  the  seller  to  the  buyer 
at  the  delivery  point  named  in  the  contract.     The 


122 


PURCHASING  AND  STORING 


DELIVERY 


123 


seller's  responsibility  ceases  when  he  lias  made  deliv- 
ery as  stipulated,  and  it  might  be  inferred  that  at 
this  point  the  buyer's  responsibility  commences. 
This,  however,  is  far  from  being  the  case.  In  fact, 
there  is  generally  more  work  involved  in  getting  de- 
livery than  there  is  in  tracing  the  goods  from  the 
delivery  point  to  destination. 

Inasmuch  as  the  delivery  point  may  be  hundreds  of 
miles  from  the  destination,  there  are  two  distinct 
phases  of  this  work.  The  first  phase  consists  of  some 
form  of  following  up  the  order,  keeping  track  of 
progress  made  by  the  seller,  bringing  pressure  to  bear 
when  necessary,  and  using  all  legitimate  means  to  get 
the  material  to  the  place  of  delivery  and  at  the  time 
of  delivery  agreed  upon.  In  short,  it  involves  en- 
forcing the  clause  in  the  contract  covering  this  point 
and  securing  ownership  in  the  goods.  As  already 
stated,  however,  ownership  may  pass  to  the  buyer  at 
a  considerable  distance  from  the  ultimate  destination; 
further  work  is  therefore  necessary  while  the  material 
is  in  transit. 

Traffic  Work. — The  second  phase  of  the  w^ork,  trans- 
portation, involves  a  knowledge  of  traffic  problems. 
Some  large  corporations  are  compelled  to  maintain 
extensive  traffic  departments,  chiefly  for  the  benefit  of 
the  sales  departments,  because  they  sell  much  of  their 
product  *'f.  0.  b.  destination,"  and  therefore  the  re- 
sponsibility is  on  them  to  trace  and  follow  their  ship- 
ments. Some  of  them  may  have  factories  and  ware- 
houses located  at  widely  separated  points,  between 
which  movements  of  freight  are  constantly  taking 
place. 


In  many  industrial  establishments,  however,  the 
product  is  sold  entirely  **f.  o.  b.  point  of  shipment" 
and  consequently  there  are  practically  no  traffic  prob- 
lems connected  with  the  selling  end,  the  only  work  of 
this  character  is  connected  with  incoming  freight. 
Therefore,  in  these  cases  it  usually  devolves  on  the 
purchasing  department  to  take  care  of  the  work 
within  its  own  organization.  I  shall  discuss  this 
subject  more  in  detail  in  this  chapter. 

Follow-Up  Work. — There  are  innumerable  schemes 
and  devices  in  use  for  following  up  and  getting  de- 
livery of  goods.  While  some  of  these  are  in  general 
use  and  fairly  well  standardized,  it  is  probably  an  im- 
possibility to  find  two  systems  that  work  on  identical 
lines.  The  object  is  to  get  the  goods,  and  the  methods 
adopted  by  one  concern  rarely  fit  the  conditions  sur- 
rounding the  work  of  another;  some  variations  in  de- 
tails will  always  be  found.  In  the  discussion  of  rou- 
tine work  I  shall  outline  plans  for  following  up  pur- 
chases, and  these  can  be  used  as  a  framework  on 
which  to  erect  any  structure  for  solving  individual 
problems  satisfactorily. 

The  basis  from  which  to  start  all  follow-up  work  is 
the  delivery  date  named  on  the  order,  and  the  great- 
est factor  is  the  reliance  that  can  be  placed  on  prom- 
ises. If  performances  could  bear  an  exact  relation  to 
promises,  the  problem  would  be  greatly  simplified. 
In  the  discussion,  in  Chapter  III,  on  selecting  sources 
of  supply,  particular  emphasis  was  laid  on  this  ques- 
tion of  promises  and  performances.  It  is  at  the  de- 
livery stage  of  purchasing  that  the  value  of  selecting 
right  sources  is  manifested.     There  are  many  manu- 


124 


PURCHASING  AND  STORING 


facturers  who  would  no  more*  think  of  evading  a 
promise  in  regard  to  time  of  delivery  than  they  would 
think  of  trying  to  change  the  price  on  an  accepted 
order.  Unfortunately,  however,  there  are  also  many 
who  cannot  withstand  the  allurements  and  induce- 
ments of  booking  more  business  than  they  can  prop- 
erly undertake  and  still  give  their  customers  satis- 
factory service. 

It  is  just  such  contingencies  as  the  last  named 
against  which  the  purchasing  agent  must  be  on  his 
guard;  he  must  formulate  some  scheme  for  getting  his 
own  goods  shipped  on  time.  In  work  of  this  char- 
acter, the  suppliers  should  never  be  approached  with 
unnecessary  requests  for  information  and  other  foims 
of  petty  annoyances;  if  they  are,  the  very  object 
sought  will  be  defeated.  A  busy  concern  that  is  doing 
its  best  to  satisfy  customers  does  not  want  to  be  pes- 
tered with  such  things,  and  if  they  are  constantly  an- 
noyed they  will  not  give  proper  attention  to  legiti- 
mate inquiries.  Intelligence  must  be  used  in  the  pur- 
chasing department  in  the  handling  of  these  matters. 

In  addition  to  the  stereotyped  forms  which  are  usu- 
ally sent  out,  and  which  serve  for  the  intended  pur- 
pose up  to  a  certain  point,  there  should  be  some  well- 
directed  letters  that  will  bring  the  desired  results. 
These  can  be  supplemented  by  visits  to  the  vendor's 
warehouses  and  factories.  It  is  the  practice  of  some 
large  corporations  to  keep  men  permanently  on  the 
road  following  up  purchases,  and  ascertaining  the 
progress  made  in  getting  out  the  product,  if  it  k  * 
manufactured  one.  In  times  of  stress  and  unusual 
activity  this  course  is  adopted  by  a  great  many  con- 


DELIVERY 


125 


Progress 
Report 

JOHN  SMITH  MFG.  CO. 

Copies  to 

lOO  SIXTEENTH  AVE. 
NEW  YORK 

Order  No. 

Date  of  Order 

Date  Promised 

Material 

Name  of  Supplier 

Date  of  Investigation 

Place  of  Investigation 

Investigation  made  by 

Date  report  sent  in                                        1 

NATURE  OF  REPORT 

% 

' 

^ionori 

PIG.    19.      FORM    FOR    TRAVELING    MEN    TO    USE    IN    REPORTING 

PROGRESS    OF   ORDERS.      AS   EXPLAINED    IN    THE    TEXT,    IT   IS   AN 

ESSENTIAL  PART  OF  THE  FOLLOW-UP  SYSTEM  OF  MANY  CONCERNS 

TO  HAVE  THEIR  REPRESENTATIVES  VISIT  THE 

SELLERS'  FACTORIES   AND  WAREHOUSES. 

cerns.  At  any  time  when  great  importance  attaches 
to  delivery  of  material  this  method  should  invariably 
be  used,  for  it  is  undoubtedly  the  most  effective  means 
of  getting  the  desired  results.  Some  illustrations  of 
follow-up  forms  are  given  in  the  chapter  on  *' Routine 
Work."  There  should  also  be  standard  forms  on 
which  the  travelling  men  may  make  their  reports, 
similar  to  those  shown  in  Figures  19  and  20. 


126 


PURCHASING  AND  STORING 


DELIVERY 


127 


Marfp  hy 

TO  JOHN  SMITH  MFG. 

INSPECTION    REPORT                   Copies  of  this  report 

sent  to 

rr> 

CU. 

Matprial 

Purchased  from 

Drrlpr  No 

Date  material  was 
Date  of  Ord«r                                         ready  for  insper.tion 

Place  of 
inspection 

Date  of                                               Date 
inspection                                                sent  in 

DETAIL  OF  INSPECTION  AND  TESTS 

. 

Report  approved  by 

Signed          

Pate  of  annroval 

FIG.  20.    inspector's  report  form 

Several  copies  of  this  may  have  to  be  made,  and  sent  to  interested 

parties. 

Emergency  Orders.— Every  purchasing  department 
at  some  time  or  another  issues  rush,  or  emergency, 
orders ;  these  cannot  be  handled  by  means  of  the  regu- 
lar follow-up  system.  The  manner  in  which  they 
should  be  handled  depends  on  the  number  of  orders- 
some  departments  have  to  issue  many  more  than 
others.  The  best  plan  is  to  have  extra  copies  of  the 
orders  made,  and  to  keep  them  continually  in  a  prom- 
inent place  so  that  they  will  get  daily  attention  until 


disposed  of.  It  is  sometimes  advisable  to  have  the 
original  order  rubber-stamped  '* Emergency ,' '  in  large 
letters,  and  sent  by  special  delivery.  These  methods 
invariably  secure  prompt  attention  for  the  order. 

Helps  in  Getting  Deliveries.— The  prompt  return  of 
cars  and  of  all  returnable  containers  is  a  factor  in 
getting  better  delivery ;  giving  close  attention  to  these 
matters  will  mean  greater  efficiency. 

Bonus  and  penalty  clauses  are  sometimes  inserted 
in  contracts  with  the  idea  of  keeping  deliveries  up  to 
schedule,  but  this  procedure  is  seldom  resorted  to  in 
buying  material  and  supplies.  It  is  confined  almost 
entirely  to  construction  work  and  purchases  in  con- 
nection with  such  work. 

Dependable  service  on  the  part  of  the  seller  is  the 
important  feature  of  delivery.  There  are  houses  that 
can  be  depended  upon  in  almost  any  emergency  or 
contingency.  Abnormal  market  conditions,  labor  dis- 
turbances, and  transportation  difficulties  do  not  seem 
to  disturb  them,  or,  if  they  do,  the  concerns  make 
good  nevertheless.  They  do  not  throw  up  their  hands 
and  transfer  the  trouble  to  some  one  else.  Their  main 
object  is  to  take  care  of  their  customers  as  they  have 
agreed  to  do.  Such  service  is  valuable  to  the  buyer; 
it  is  worth  paying  for.  If  he  pays  only  what  he 
would  have  had  to  pay  another  bidder  he  has  a  good 
bargain,  for  the  other  man  might  have  cost  him  con- 
siderable time,  effort,  and  expense  in  getting  delivery. 

Some  delivery  promises  are  made  by  salesmen  to 
secure  an  order  without  any  knowledge  on  their  part 
as  to  the  ability  of  their  plant  to  make  good  on  the 
promises.    Salesmen  should  be  fully  posted  on  these 


./^ 


128 


PURCHASING  AND  STORING 


points.  They  should  be  able  to  answer  accurately 
and  authoritatively  any  questions  regarding  delivery, 
and  should  be  ready  to  give  undertakings  on  this 


score. 


Inspection. — ^At  some  time  and  at  some  place  all 
purchases  must  be  inspected.  This  inspection  may 
take  many  forms.  The  receiving  clerk  may  make 
only  a  superficial  examination,  or  he  may  have  to 
count  carefully,  measure,  and  weigh  certain  materials. 
When  goods  are  received  at  the  consignee's  factory, 
the  inspection  may  be  made  independently  of  the  re- 
ceiving clerk,  and  the  material  may  be  put  to  some 
simple  tests  and  possibly  compared  with  samples  or 
goods  delivered  on  previous  orders.  I  shall  treat  all 
these  forms  of  inspection,  and  also  the  receipt  of  ma- 
terial when  the  destination  is  the  purchaser's  factory 
or  storeroom,  in  the  discussion  of  storeskeeping,  a 
subject  with  which  they  more  properly  belong. 

Inspection  Before  Shipment. — Many  contracts  are 
placed  which  contain  stipulations  regarding  inspec- 
tion before  shipment  or  during  tlie  manufacturing 
process  in  the  seller's  factory.  It  is  usual  for  the 
technical  staff  to  specify  the  nature  of  such  inspec- 
tion, and  to  descri])e  clearly  the  essential  tests  they 
wish  made.  It  then  becomes  the  duty  of  the  pur<^has- 
ing  department  to  have  these  specifications  incorpor- 
ated in  the  order  or  contract,  and  to  ascertain  from 
the  sellers  when  the  material  is  ready.  Since  the  in- 
spectors themselves  may  not  be  under  the  jurisdiction 
of  the  purchasing  department,  this  department  should 
notify  the  proper  authority  to  have  the  inspection 
made. 


DELIVERY 


129 


Inspection  reports— as  illustrated  in  Figure  20,  or 
some  other  suitable  form— should  be  made  out  by  the 
inspector  in  duplicate  or  triplicate,  as  required,  and 
forwarded  to  the  home  office.  The  purchasing  depart- 
ment should  always  get  a  copy,  which  should  be  filed 
with  the  contract  papers,  or  else  a  notation  of  it 
should  be  made  on  the  order. 

Testing  Samples.— Samples  for  testing  purposes 
may  be  taken  from  shipments  on  arrival  at  destina- 
tion, or  they  may  be  secured  before  shipment  is  made 
by  the  seller.  Those  establishments  that  maintain 
their  own  testing  laboratories  can  furnish  the  results 
of  these  tests  to  the  purchasing  department;  if  this 
is  not  done,  arrangements  should  be  made  with  some 
outside  concern  to  do  this  work.  Both  the  inspection 
and  the  testing  of  any  moderate-sized  establishment 
can  probably  be  done  cheaper  and  better  by  one  of 
the  firms  that  specialize  in  this  work.  The  purchasing 
department  should  buy  the  services  of  some  good  firm 
for  such  work  as  it  requires  done,  and  issue  an  order 
in  the  regular  way.  There  is  an  advantage  in  having 
this  work  done  outside,  because  the  benefit  of  the 
wide  experience  of  the  inspecting  firm  is  obtained; 
nevertheless,  there  is  some  difference  of  opinion  on 
this  score.  It  is  contended  that  while  a  man  testing 
only  a  few  materials  for  the  uses  of  one  factory  be- 
comes a  keen  specialist  on  these  few  materials,  he  is 
liable  to  become  narrow  as  a  result  of  this  kind  of 
experience. 

Need  of  Recognized  Methods  of  Testing.— Some 
very  large  corporations  maintaining  extensive  labora^ 
tories  can  enforce  their  own  methods  of  testing  and 


130 


PURCHASING  AND  STORING 


DELIVERY 


131 


I 


sampling,  but  undoubtedly  a  need  exists  among  the 
majority  of  industrial  establishments  for  a  bureau  for 
testing  materials  and  supplies  according  to  some  rec- 
ognized standards.  All  inspection  and  testing  should 
then  be  based  on  the  standards  adopted. 

Inspection  is  often  one  of  the  weakest  points  of  a 
manufacturing  plant's  operating  system.  It  is  fre- 
quently too  lax,  and  sometimes  too  rigid.  Exact 
methods  ought  to  be  in  universal  use — then  the  criti- 
cisms that  sometimes  arise  regarding  unfair  testing 
methods  could  not  come  up. 

The  question  as  to  whether  inspection  should  be 
entirely  under  the  jurisdiction  of  the  purchasing  de- 
partment, or  should  be  controlled  by  the  manufac- 
turing department  or  by  a  technical  staff,  is  also  de- 
batable. The  purchasing  department  is  held  respon- 
sible for  obtaining  the  quality  specified,  and  when 
material  fails  to  check  up  to  the  specified  quality,  the 
onus  of  enforcing  the  specification  is  thrown  on  the 
piirchasing  department.  It  is  contended  that  this  de- 
partment should  therefore  control  testing  and  inspec- 
tion. The  point  is  open  to  argument,  because  the  pur- 
chasing department  did  not  originate  the  specification, 
neither  is  it  the  actual  user  of  the  material. 

The  determination  of  the  question  will  vary  in  in- 
dividual cases.  A  laboratory  maintained  by  an  in- 
dustrial establishment  should,  in  any  case,  be  a  sep- 
arate entity.  Its  services  should  be  at  the  call  of  any 
of  the  departments,  for  at  some  time  or  another  any 
one  of  them  may  require  such  services.  Inspection 
may  also  be  dissociated  in  a  similar  way.  This  ar- 
rangement can  be  made  in  any  establishnumt  where 


there  is  sufficient  work  for  one  or  more  men.  Compe- 
tent inspection  of  incoming  goods  will  prevent  much 
production  loss;  the  time  to  determine  whether  or  not 
the  goods  comply  with  the  specifications  is  before,  or 
at  the  moment  of,  arrival— not  when  they  are  needed 
for  use,  or  when  they  are  already  under  manipulation 

in  the  shop. 

Transportation  Problems. — Some  establishments 
have  a  traffic  manager,  whose  duties  are  restricted  to 
looking  after  the  outgoing  shipments.  Under  such  an 
arrangement,  the  incoming  shipments  have  to  be 
taken  care  of  by  the  purchasing  department.  This 
should  not  be  the  case,  for  the  traffic  manager  has 
more  influence  with  the  railroads  in  general  than  the 
purchasing  agent.  He  can  get  quicker  action  and 
demand  prompter  attention  to  his  requests  than  a 
buyer  possibly  could,  because  he  controls  the  routing 
on  outgoing  shipments  to  a  large  extent,  and  exerts 
by  this  means  a  tremendous  leverage  on  the  operating 
department  of  a  railroad  through  its  freight  agent's 
office.  If  similar  work  is  carried  on  in  two  depart- 
ments, there  must  be  some  duplication  of  work,  also, 
of  records,  freight  classifications,  and  other  matters 
which  strictly  pertain  to  traffic  problems. 

Some  buyers  make  a  practice  of  issuing  orders  bear- 
ing the  instructions  **Ship  and  trace,"  indicating  the 
desire  of  the  purchaser  that  a  tracer  be  started  the 
same  day  shipment  is  delivered  to  the  railroad  com- 
pany—in fact,  before  the  consignment  has  left  the 
freight  yards.  This  practice  is  decreasing;  it  should 
be  discontinued  altogether. 
The  railroads,  undoubtedly  with  some  justification, 


132 


PURCHASING  AND  STORING 


consign  to  the  waste  basket,  many  requests  for  tracers 
when  the  papers  show  that  the  goods  have  not  had 
time  to  reach  their  destination.  If  formei-ly  these 
premature  tracers  had  any  effect  in  expediting  the 
transit  of  goods,  they  have  long  since  lost  their  effiect- 
iveness.  It  is  much  better  to  start  a  wire  tracer  the 
day  after  the  consignment  is  due  to  arrive  at  destina- 
tion. 

The  railroads  perform  for  shippers  a  vast  amount 
of  clerical  work  in  tracing  shipments,  which  comprises 
a  very  considerable  item  of  expense  in  the  transpor- 
tation of  goods.  It  cannot  be  doubted  that  a  large 
part  of  this  expense  could  be  saved  the  transportation 
companies  by  the  exercise  of  patience  on  the  part  of 
shippers  and  consignees,  and  by  confining  tracer  re- 
quests to  those  instances  in  which  shipments  have  ac- 
tually gone  astray  or  have  been  delayed  in  transit. 

Before  an  order  is  placed,  careful  consideration 
should  be  given  the  question  whether  shipment  should 
be  made  by  parcel  post,  express,  or  freight.  The  date 
on  which  goods  are  required  will  be  the  determining 
factor  in  some  cases.  It  is,  of  course,  expedient  to 
get  the  material  in  good  time,  but  to  have  it  come  by 
express  and  then  be  held  in  tlie  receiving  rbom  or 
stores  several  days  is  an  unnecessary  expense,  when 
the  same  lot  could  just  as  well  have  been  sent  by 
freight  and  the  differences  in  charges  could  ]iave  been^ 
saved. 

When  reference  cannot  be  made  to  an  organized 
traffic  department,  the  purchasing  department  must  be 
in  a  position  to  check  freight  charges  and,  before 
placing  orders,  it  should  be  able  to  verify  tlie  freight 


DELIVERY 


133 


rate  named  in  the  quotation  of  the  firm  that  is  to  re- 
ceive the  order.  This  can  be  done  through  the  local 
freight  agent.  The  purchase  order  should  carry  in- 
structions concerning  the  routing  of  the  material  to  be 
shipped,  the  classification,  anci  the  freight  rate  which 
is  to  apply. 


1  iU 

'41 


CHAPTER  VII 
INVOICES 

Completion  of  the  Purchasing  Cycle.— As  shown  in 

Figure  1,  the  cycle  of  purchasing  does  not  end  with 
getting  delivery  of  the  material;  it  is  incumbent  on 
the  purchaser  to  see  that  the  seller  obtains  the  con- 
sideration agreed  upon.  Owing  to  the  departmental 
formation  in  establishments,  tlie  actual  payments  are 
not  made  by  the  purchasing  department,  but  the  sell- 
er's invoice  is  treated  in  such  a  manner  as  virtually 
to  make  it  as  good  as  cash  to  the  seller  at  the  agreed 
time  of  payment. 

This  work  is  generally  looked  upon  as  merely  com- 
paring and  checking  with  facts  already  established, 
and  although  requiring  care  and  methodical  treatment 
it  is  not  supposed  to  demand  a  great  amount  of  in- 
telligence or  initiative.  While  it  is  true  that  care 
and  close  application  are  necessary,  still  ther(»  are 
some  phases  of  the  work  which  call  for  something 
more  than  mere  clerical  accuracy.  There  is  no  little 
opportunity  for  the  man  with  broad  knowledge  and 
creative  instinct. 

When  it  is  remembered  that  there  are  some  orders 
against  which  a  great  many  invoices  are  rendered, 
and  that  every  order  issued  is  responsible  for  at  least 
one  invoice,  a  better  realization  is  gained  of  the  im- 

134 


INVOICES 


135 


portance  of  the  work  connected  with  invoices,  and  of 
the  magnitude  it  may  assume  when  a  great  many  or- 
ders are  issued. 

It  is  necessary  to  keep  in  mind  the  essential  differ- 
ences in  an  invoice  as  it  first  arrives  in  the  purchas- 
ing agent's  office  and  when  it  finally  passes  out  of  the 
office.  In  its  initial  stage  it  is  a  harmless  document, 
but  its  characteristics  are  so  altered  on  its  passage 
through  the  department  as  to  transform  it  into  a  docu- 
ment of  considerable  potentiality. 

Work  to  be  Done  on  Invoices. — There  is  no  recog- 
nized standard  method  of  handling  invoices,  or  of 
executing  the  necessary  work  in  connection  with 
them.  While  there  are  certain  features  that  must  be 
adequately  covered,  the  manner  of  execution  is 
largely  a  matter  for  individual  decision.  It  is  well 
in  any  case,  however,  to  concentrate  this  work  as 
much  as  possible,  for  invoices,  more  than  any  other 
documents,  seem  liable  to  be  misplaced  and  lost. 

In  some  concerns,  invoices  go  first  to  the  accounting 
department  for  registration  and  checking  extensions; 
in  others,  only  extensions  are  checked.  Sometimes 
the  accounting  department  checks  the  invoice  against 
receipt  of  material;  in  some  cases  it  never  reaches 
that  department  until  it  has  been  fully  approved  in 
every  particular. 

To  simplify  the  discussion  I  propose  to  treat  in- 
voices on  the  supposition  that  the  purchasing  depart- 
ment has  the  task  allotted  to  it  of  verifying  quality 
and  delivery,  checking  prices  and  extensions,  classify- 
ing charges  under  proper  headings,  and  finally  ap- 
proving for  payment.     The  accounting  department, 


136 


PURCHASING  AND  STOKING 


INVOICES 


137 


h;'i 


then,  must  solve  the  prohlem  of  distributing  the 
amounts  to  the  various  accounts  and  putting  the  in- 
voice in  shape  for  payment. 

Standardizing  Invoices. — There  has  been,  at  times, 
considerable  agitation  in  favor  of  standardizing  in- 
voice forms,  but  the  movement  has  not  made  much 
progress.  If  a  standard  size  could  be  adopted,  it 
would  probably  bring  some  advantage  in  filing,  hand- 
ling, and  vouchering;  or  at  least,  a  standard  width 
would  help  somewhat  to  secure  these  advantages. 
There  does  not  appear  to  be  any  good  reason  for  the 
great  disparity  in  dimensions  which  now  exists.  Ap- 
parently there  is  a  tendency  towards  uniformity,  for 
the  exaggerated  sizes  formerly  used  are  slowly  disap- 
pearing. 

Many  firms  send  out  invoice  forms  with  their  pur- 
chase orders,  and  insert  a  clause  in  the  order  to  the 
effect  that  the  goods  must  be  l)illed  on  these  forms. 
This  is  a  proceeding  which  has  been  much  criticized, 
and  great  difficulty  has  been  experienced  in  getting 
vendors  to  use  the  forms.  The  scheme  originated 
with  accountants — no  practical  purchasing  agent 
would  impose  such  a  condition.  All  the  advantages 
in  connection  with  these  invoii»es  are  on  the  side  of 
the  buyer;  to  the  seller  they  are  a  source  of  trouble 
and  annoyance,  and  interfere  with  his  accounting 
methods.  Every  business  house  is  recogniz(Kl  imper- 
sonally to  a  certain  extent  from  its  stationery,  which 
has  an  advertising  value  to  the  house.  That  the  buyer 
should  impose  a  restriction  curtailing  this  advantage 
is  unfair,  and  unless  the  practice  is  made  universal  it 
will  always  be  unpopular. 


Relation  of  Invoices  to  Purchasing.— The  work  con- 
nected with  the  invoice  is  the  last  link  in  the  pur- 
chasing chain;  it  has  already  been  emphasized,  in 
previous  chapters,  that  each  phase  of  purchasing 
work  must  be  maintained  at  a  definite  standard  to 
secure  the  greatest  efficiency.  The  negotiations  lead- 
ing up  to  the  actual  placing  of  the  order  may  have 
been  conducted  in  the  most  able  manner,  and  all  oper- 
ations connected  with  obtaining  the  best  price,  qual- 
ity, delivery,  and  terms  may  have  been  carried 
through  in  a  way  which  will  secure  to  the  buyer  the 
utmost  advantages ;  yet  all  this  work  may  be  nullified 
and  the  benefits  lost  if  the  invoices  are  not  dealt  with 
in  such  a  manner  as  to  insure  their  being  permanently 
secured.  Delay  in  dealing  with  the  invoice  might 
cause  the  loss  of  the  cash  discount  and,  in  addition, 
the  loss  of  the  indirect  and  contingent  advantages 
that  accrue  from  the  prompt  approval  and  payment 
of  invoices.  Careless  checking  and  examination 
would  involve  the  risk  of  passing  the  invoice  with  in- 
accuracies and  excessive  prices,  with  the  result  that 
the  good  work  previously  done  would  be  rendeied 
valueless. 

Trade  Acceptances.— No  discussion  of  invoices 
^vould  be  complete  without  some  reference  to  accept- 
ances. The  use  of  these  in  this  country  is  at  present 
very  restricted,  but  considerable  publicity  has  re- 
cently been  given  to  the  matter.  It  is  only  a  ques- 
tion of  the  custom's  becoming  better  known  to  get  it 
firmly  established  as  a  recognized  part  of  our  business 
system. 

This  type  of  .credit  instrument  is  in  common  use  in 


<>  I. 


i 


I 


;    !lil 


138 


PURCHASING  AND  STORING 


Europe.  During  my  experience  there,  trade  accept- 
ances seemed  to  be  as  common  as  checks,  and  it  was 
not  an  unusual  occurrence  to  see  invoices  with  ac- 
ceptances attached.  Bankers  in  this  country  are  as  a 
unit  in  favor  of  this  instrument,  and  it  only  re- 
quires education  and  knowledge  of  its  use  to  secure 
its  general  adoption  by  all  business  interests. 

The  form  of  an  acceptance  does  not  vary  any  more 
than  the  form  of  checks;  an  illustration  of  the  word- 
ing of  one  is  given  in  Figure  21.  The  acceptance 
should  always  include  the  statement  that  it  is  given 
to  cover  the  purchase  of  goods.  The  method  of  pro- 
cedure in  connection  with  these  acceptances  is  some- 
what similar  to  that  of  attaching  a  draft  to  a  bill  of 
lading  for  export  shipment,  but  there  are  many  points 
of  difference. 

The  advantages  in  using  this  instrument  must  be 
mutual,  and  inducements  must  be  offered  to  buyers 


I 


<s 


OQ 


> 

00 


Name  of  Seller 
Address 


No., 


Date. 


.Days  after  date  pay  to  the  order  of.- 


HuM  of  Seller 


.Dollars 


This  accpptance  is  given  to  cover  value  of  goods  received. 


Name  of  Buyer 


Name  of  Seller 


Address 


By- 


"Treasurer 


FIG.  21.      FORM  OF  AN  ACCEPTANCE.      DEVELOPMENTS  IN     THE 
NEAR  FUTURE   MAY  BRING    THESE  INTO  LARGE  USE. 


INVOICES 


139 


to  get  them  to  execute  acceptances  instead  of  leav- 
ing an  account  open.  It  will,  no  doubt,  become  the 
custom  to  make  stipulations  regarding  acceptances 
when  agreeing  to  the  terms  in  closing  a  contract,  but 
as  terms  are  at  present  arranged  negotiations  would 
work  out  along  some  such  lines  as  the  following: 

1.  When  goods  have  been  sold  on  the  basis  of  30 
days '  net,  1  per  cent  cash  10  days,  the  giving  of  an 
acceptance  by  the  buyer  would  entitle  him  to  60 
days'  net;  or  1  per  cent  discount  on  giving  a  30- 
day  acceptance. 

2.  Goods  sold  on  the  basis  of  60  days'  net,  2  per  cent 
cash  10  days,  would  entitle  the  buyer,  on  giving 
an  acceptance,  to  go  90  days'  net;  or  he  would  re- 
receive  1  per  cent  discount  on  giving  a  60-day 
acceptance. 

3.  Goods  sold  on  the  basis  of  90  days '  net,  2  per  cent 
on  the  10th  prox.,  would  entitle  the  buyer,  on  giv- 
ing an  acceptance,  to  120  days'  net;  or  he  would 
receive  1  per  cent  on  giving  a  90-day  acceptance. 

These  periods  and  discounts  could  be  altered  to  suit 
any  arrangement;  even  the  maximum  cash  discount 
could  be  given  in  some  cases  with  the  maximum  time, 
provided  an  acceptance  were  given  by  the  buyer 
promptly. 

In  any  arrangement  such  as  indicated  for  giving  ac- 
ceptances there  is  an  apparent  advantage  to  the  buyer, 
but  there  are  also  many  compensating  advantages  for 
the  seller.  Business  houses  carry  many  open  accounts 
that  are  vague  and  indefinite  concerning  the  time 


fil 


140 


PURCHASING  AND  STORING 


INVOICES 


141 


when  a  settlement  will  be  obtained.  As  assets,  tliese 
accounts  are  to  a  certain  extent  intangible— at  least 
the  seller  has  nothing  to  show  for  them  ex(iept  an 
entry  in  his  books;  but  acceptances  have  a  definite 
value.  They  are,  in  fact,  as  good  as  cash,  for  any 
bank  will  discount  them  in  preference  to  promissory 
notes,  and  probably  at  a  lower  rate.  Moreover,  they 
make  a  clean-cut,  definite  settlement  between  the 
buyer  and  seller  from  which  there  is  no  redress.  Now 
that  acceptances  are  coming  into  use,  it  will  not  be 
necessary  for  so  many  houses  to  carry  their  (custom- 
ers, and  in  many  cases  practically  to  finance  them. 

If  a  concern  has  a  large  number  of  slow-pay  (custom- 
ers, they  are  a  big  expense  to  the  business  and  must 
necessarily  cause  an  increase  in  the  cost  of  goods. 
The  result  is  that  the  prompt  payer  is  penalized.  The 
trade  acceptance  will  equalize  conditions,  and  will  also 
prevent  the  making  of  unjust  and  unfair  claims.  It 
will  mitigate  many  of  the  evils  connected  with  cash 
discounts,  and  will  bring  about  ))etter  and  easier  (col- 
lections. These  are  only  a  few  of  the  benefits  that 
will  be  derived  from  the  use  of  the  acceptance.  As  it 
will  undoubtedly  come  into  more  general  use,  and 
since  it  is  closely  associated  with  invoices,  purchas- 
ing agents  should  make  themselves  acquainted  with 
its  uses  and  advantages,  for  the  time  will  come  when 
those  buyers  who  are  willing  to  give  an  acc(3ptance 
will  be  given  the  preference  by  the  sellers  over  those 
who  are  not. 

Arranging  Dates  for  Payment  of  Invoices.— When 
a  purchasing  department  is  receiving  a  large  number 
of  invoices  from  one  concern  every  month,  it  can  fre- 


quently arrange  for  specified  dates  on  which  to  pay 
them.  Especially  is  this  the  case  if  they  are  for  small 
amounts,  and  at  the  same  time  secure  the  maximum 
cash  discount.  When  the  cash  discount  is  for  ten 
days,  considerable  work  and  bookkeeping  is  involved 
if  checks  have  to  be  made  out  for  practically  every 
invoice. 

If  the  matter  is  taken  up  in  the  right  spirit  with 
the  sellers,  arrangements  can  frequently  be  made  to 
send  checks  twice  a  month  on  the  basis  that  all  in- 
voices dated  from  the  first  to  the  fifteenth  shall  be 
paid  on  the  twenty-fifth  of  the  same  month,  and  all 
invoices  dated  from  the  sixteenth  to  the  last  day  of 
the  month,  on  the  tenth  proximo.  This  arrangement 
gives  ample  time  to  get  them  approved,  and  effects  a 
considerable  saving  in  bookkeeping  work. 

Avoiding  Duplicate  Payment  of  Invoices. — It  may 
seem  inconceivable  to  those  persons  unaccustomed  to 
handling  invoices  that  any  establishment  with  an 
efficient  accounting  system  could  pay  an  invoice  twice. 
Yet  this  has  occurred  in  many  business  concerns,  both 
large  and  small.  Moreover  the  difficulty  will  prob- 
ably never  be  entirely  overcome  while  the  human  ele- 
ment is  a  factor  in  invoice  transactions. 

There  are,  however,  many  safeguards  which  can  be 
erected  by  the  purchasing  department  to  prevent  du- 
plication of  payments.  One  of  the*  best  methods,  and 
perhaps  the  one  most  effective  and  most  generally 
adopted,  is  to  enter  each  invoice  on  the  copy  of  the 
order  retained  in  the  purchasing  agent's  office.  Any 
duplicate  coming  through  should  then  be  instantly  de- 
tected and  destroyed  if  the  original  is  found  to  be  iu 


142 


PURCHASING  AND  STORING 


INVOICES 


143 


III 


existence.  If  the  original  cannot  be  found,  then  to 
provide  against  any  contingency  of  its  turning  up, 
the  duplicate  can  be  approved.  It  should  be  distinctly 
and  prominently  marked  as  a  duplicate,  so  that  the 
attention  of  the  accounting  department  cannot  fail  to 
be  attracted  to  its  status. 

In  some  concerns  many  thousands  of  invoices  pass 
through  the  purchasing  department  every  month,  and 
each  one  of  these  represents  something  definite  to  that 
department,  and  has  a  tangible  connection  with  some 
contract  or  order.  But  when  these  invoices  arrive 
in  the  accounting  department,  they  are  simply  so 
many  documents  to  be  collected,  tabulated,  allocated, 
and  vouchered,  if  they  carry  the  proper  authentica- 
tion and  approval.  It  is  the  purchasing  depjirtment 
which  must  absolutely  see  to  it  that  no  improper  in- 
voice gets  through. 

If  it  were  just  a  question  of  duplicate  invoices — 
that  is,  invoices  of  the  same  date,  for  the  same 
amount,  and  for  the  same  material — the  matter  would 
be  simplified,  because  these  are  more  easily  detected. 
But  there  are  complications.  For  example,  two  in- 
voices may  be  rendered  for  the  same  material  l)ut, 
through  some  mistake,  bear  different  dates.  Also  an 
order  may  be  placed  for  250  articles,  with  instructions 
to  ship  50  by  express  and  200  by  freight.  The  ex- 
press shipment  is  forwarded  and  an  invoice  mailed 
for  50.  Probably  the  following  day,  or  shortly  after- 
ward, the  remaining  200  are  shipped  by  freight.  This 
time,  another  invoice  is  rendered  for  the  full  quantity 
of  250.  There  are  many  other  ways  in  which  invoices 
can  be  made  out  improperly  but  inadvertently  by  the 


sellers,  but  these  illustrations  will  suffice  to  show  that 
it  is  entirely  the  province  of  the  purchasing  depart- 
ment to  prevent  approval  of  them.  If  they  once  get 
through  that  department  they  will  probably  be  paid. 

There  are  other  methods  of  preventing  duplicate 
payments.  I  shall  describe  one  here.  The  receiving 
clerk's  receipt  form  can  be  attached  to  every  invoice, 
and  if  a  duplicate  bill,  or  one  for  an  excessive  amount 
of  material,  is  rendered  there  will  be  no  receiving  slip 
attached  by  which  payment  could  be  authorized.  I 
shall  give  the  details  of  these  preventive  measures  in 
the  chapter  on  **Koutine  Work.'' 

Credits. — Incorrect  invoices  will  appear  in  every 
purchasing  department;  the  manner  of  handling  them 
varies  considerably.  Any  simple  scheme  that  is  ef- 
fective is  all  that  is  necessary.  If  there  is  too  much 
red  tape,  it  will  destroy  the  usefulness  of  the  plan; 
the  task  is  merely  to  rectify  and  adjust  the  discrep- 
ancies. In  considering  this  problem,  it  is  important 
to  ascertain  in  what  manner  these  discrepancies  arise. 
There  are  various  ways  in  which  invoices  may  be  in- 
accurate. The  price  may  be  incorrect,  or  the  exten- 
sions or  footings  may  be  wrong.  Quantities  in  excess 
of  order  may  be  shipped  or  billed,  or  the  material 
may  not  pass  the  specified  tests  for  quality.  Invoices 
that  fall  into  these  classes  accumulate  with  amazing 
rapidity  in  large  offices,  and  some  effective  method 
must  be  devised  for  disposing  of  them. 

Some  concerns  hold  all  such  bills  until  a  credit  or 
a  corrected  invoice  is  received.  This  course  is  open 
to  many  objections.  Sellers  are  generally  very  slow 
in  investigating  such  matters,  and  the  buyer  may 


144 


PURCHASING  AND  STORING 


write  half  a  dozen  letters  before  getting  any  satisfac- 
tion.   Accordingly,  so  much  time  may  elapse  that  it 
will  be  difficult  for  either  side  to  produce   tangible 
proofs  to  support  or  controvert  the  claim,  as  the  case 
may  be.    Such  delay  causes  further  complications  irx 
connection  with  cash  discounts,  for  the  buyer  often 
claims  that  he  is  entitled  to  the  discount  whenever  the 
bill  is  paid,  if  the  mistake  in  it  is  the  fault  of  the 
seller.     The  seller,  on  his  part,  is  unwilling  to  allow 
this  contention.     Evidently,  it  is  imperative  to  dis- 
pose of  all  inaccurate  invoices  in  the  shortest  i)ossible 
time,  not  only  to  expedite  the  work  in  the  buyer's 
accounting  department,  but  in  order  to  prevent  the 
necessity  of  the  large  amount  of  work  which  will  arise 
in  connection  with  them  if  they  are  held  indefinitely. 
The  scheme  which  has  been  found  most  satisfactory, 
and  which  I  would  here  suggest,  is  the  one  according 
to   which   the   buyer  makes   out   debits   against   the 
seller.     The  forms  to  be  used  will  be  found  in  the 
chapter  on  ** Routine  Work.''     Even  when  this  plan 
is  used,  some  invoices  must  be  held  for  adjustment, 
because  some  discrepancies  are  always  open  to  argu- 
ment, and  the  purchasing  department  must  be  abso- 
lutelv  and  positively  certain,  in  making  a  debit,  that 
it  is  V^stified.    If  it  is  not,  then  the  debit  will  not  be 
accepted  by  the  seller,  and  the  whole  matter  will  be 
hung  up  again.    When  a  doubt  exists,  caution  must 
be  exercised— the  seller  should  be  given  an  oppor- 
tunitv  to  explain  his  view  of  the  matter.    T}xe  whole 
subject  of  deductions  from  invoices  and  allowances 
upon  them,  is  a  source  of  much  trouble  and  annoy- 
ance, but  the  problem  can  be  greatly  simplified  if 


INVOICES 


145 


judgment,  discretion,  and  dispatch  are  all  employed. 
Meaning  of  **Net  Cash.''— The  term  ''net  cash"  is 
a  somewhat  ambiguous  expression  because  no  inter- 
pretation that  has  universal  acceptance  can  be  placed 
on  it.  A  majority  of  the  invoices  received  in  a  pur- 
chasing department  are  issued  in  accordance  with 
terms  specifically  agreed  upon  and  stated  on  the  or- 
der, but  there  are  a  great  many  that  are  received  for 
goods  ordered  verbally  without  a  definite  understand- 
ing as  to  terms.  Frequently  these  are  marked  ''Net 
Cash." 

This  expression  is  interpreted  by  some  to  mean 
that  payment  is  to  be  made  in  thirty  days,  and  by 
others  that  payment  should  be  made  on  delivery. 
Again,  some  distinguish  between  "Spot  Cash"  and 
"Net  Cash;"  they  take  the  former  to  mean  that  pay- 
ment must  be  made  as  soon  as  an  invoice  is  received, 
and  the  latter  to  imply  that  payment  must  be  made 
as  soon  as  delivery  is  effected  and  the  recipient  has 
had  time  to  check  and  examine  the  goods  and  invoice. 

What  does  the  firm  mean  that  is  responsible  for 
putting  this  term  on  a  billhead?  Can  it  be  shown 
that  sellers  attach  any  significance  to  the  literal  term 
"Net  Cash"?  My  own  experience  leads  me  to  believe 
that  it  should  be  interpreted  as  meaning  that  no  cash 
discount  will  be  allowed  under  any  circumstances,  and 
that  the  invoice  must  be  paid  at  the  expiration  of  the 
usual  net  time  allowed  by  the  established  custom  of 
the  trade  for  the  particular  article,  material,  or  com- 
modity represented  by  the  invoice. 

Freight  Charges. — Transportation  problems  were  re- 
ferred to  in  the  last  chapter,  but  the  question  of 


, ,  1 


146 


PURCHASING  AND  STORING 


1 1 


checking  and  approving  freight  charges  remains  still 
to  be  considered.  If  a  traffic  department  is  main- 
tained by  the  establishment,  then  it  is  the  duty  of 
that  department  to  check  and  approve  all  transporta- 
tion charges.  If  this  is  not  done  by  the  traffic  depart- 
ment, the  purchasing  department  must  do  the  work. 

Some  member  of  the  purchasing  department  should 
have  sufficient  experience  in  traffic  problems  to  han- 
dle these  matters  intelligently.  If  there  is  sufficient 
volume  of  work,  it  may  take  all  the  time  of  one  man, 
or  even  of  several  men.  In  any  case,  there  should  be 
a  special  routine  for  taking  care  of  it.  I  shall  out- 
line this  procedure  in  a  simple  manner  in  the  discus- 
sion of  routine  work.  If  the  amount  of  work  justifies 
a  complicated  or  extensive  system,  it  would  be 
handled  by  a  department  organized  especially  to  do  it. 

There  is  considerable  difference  of  opinion  concern- 
ing the  relation  of  freight  charges  to  cash  discounts. 
It  is  contended  by  many  buyers  that  when  an  order 
has  been  placed  **f.  o.  b.  point  of  shipment,"  with 
freight  allowed  to  destination,  the  cash  discount 
should  be  deducted  first  and  tlie  freight  afterwards. 
Others,  however,  are  of  the  opinion  that  the  freight 
should  be  deducted  first,  and  the  cash  discount  should 
be  taken  on  the  net  amount  only.  This  is  a  debatable 
point,  and  no  legal  decision  seems  ever  to  have  been 
given  on  it.  When  the  freight  charge  is  small,  the 
question  is  not  of  great  moment.  But  there  are 
many  cases  in  which  the  freight  item  is  large;  the 
point  then  at  once  becomes  more  important. 

When  material  is  purchased  '*f.  o.  b.  destination,'' 
the  buyer  does  not  deduct  an  amount  equivalent  to 


INVOICES 


147 


the  freight  charges  before  deducting  the  cash  dis- 
count, since  he  is  not  interested  in  the  transportation 
cost.  The  seller  agrees  actually  to  deliver  the  goods 
to  the  buyer,  and  must  pay  freight  charges  and  as- 
sume risks  of  ownership  until  they  are  delivered. 

It  is  my  opinion  that  when  goods  are  bought 
*'f.  o.  b.  point  of  shipment,"  with  a  partial  freight  al- 
lowance or  full  freight  allowance  to  destination,  in 
making  settlement  the  freight  should  be  deducted 
first,  and  the  cash  discount  subsequently.  The  reason 
is  that  the  freight  allowance  is  in  the  same  category 
as  any  other  allowance,  deduction,  or  even  trade  dis- 
count. All  of  these  would  be  first  deducted,  and  the 
net  amount  of  invoice  would  then  be  subject  to  the 
agreed  cash  discount. 

Invoices  Without  Previous  Price  Arrangement.— 
There  are  always  some  orders  placed  on  which  no 
price  is  mentioned.  The  invoices  received  against 
these  orders  need  careful  scrutiny;  the  responsibility 
for  securing  a  fair  price  devolves  upon  the  person 
doing  the  work.  It  is  therefore  necessary  for  him  to 
have  a  complete  price  index.  A  form  for  this  purpose 
is  shown  in  Figure  22.  It  may  be  possible,  in  allo- 
cating and  arranging  the  work  of  the  department,  to 
have  one  comprehensive  and  complete  price  record 
to  which  reference  can  be  made  by  all  interested  em- 
ployees. Figure  14,  in  Chapter  IV,  illustrates  one 
method  of  recording  prices.  This  is  intended  more 
particularly  for  the  use  of  the  price  clerk;  in  those 
instances  in  which  it  is  essential  to  keep  quotations 
and  general  prices  distinct  from  invoice  prices,  sep- 
arate records  must  be  kept. 


lit 


148 


PURCHASING  AND  STORING 


MATERIAL 

Date 

Price 

F.O.B. 

In  Quantities 
of 

Seller 

How 
obtained 

• 

■ 

• 

FIG.  22.      A  COMPLETE  RECORD  OF  PRICES  MUST  BE  KE^T  BY  THE 

INVOICE  CLERK.     ALL  CONTRACT  PRICES  AND  PRICES  TAKEN  FROM 

INVOICES   SHOULD   BE   RECORDED,    AND   THE   LAST   COLUMN 

SHOULD  STATE  FROM  WHAT  SOURCE  THEY  WERE  OBTAINED. 

Orders  issued  without  price  are  usually  emergency 
and  **rus}i"  orders.  If  there  is  no  understanding  to 
the  contrary,  the  general  assumption  is  that  the  goods 
will  be  billed  at  the  prevailing  market  price.  There 
are  always  some  firms  that  are  ready  to  take  advan- 
tage of  one's  necessities.  The  best  protection  is  to 
avoid  such  concerns.  But  since  this  cannot  always 
be  done,  the  invoice  clerk  must  hold  them  to  **  strict 
accountability"  for  any  excesses  in  price. 

A  complete  compendium  of  prices  must  be  compiled 


INVOICES 


149 


and  kept  up  to  date.  All  trade  discounts  and  customs 
must  be  noted,  and  a  record  must  be  made  of  all 
changes  in  trade  discounts  and  methods  of  figuring. 
It  is  becoming  more  common  to  quote  base  prices  for 
many  materials,  with  extras  for  various  sizes,  weights, 
or  quantities,  and  additional  extras  for  quality,  style, 
or  finish.  It  is  no  small  accomplishment  to  become 
thoroughly  familiar  with,  and  well-versed  in,  all  of 
these  items.  While  some  of  them  are  simple,  others 
are  quite  complicated.  The  task  is  perhaps  simple 
enough  for  the  sellers,  since  they  have  only  to  become 
acquainted  with  their  own  particular  price  list,  but 
the  purchasing  department  that  buys  many  hundreds, 
and  perhaps  thousands,  of  articles  must  keep  a  rec- 
ord easy  of  reference  and  simple  in  exposition.  Fig- 
ures 23  to  26  illustrate  a  method  that  may  be  em- 
ployed for  this  purpose. 

The  Buyer^s  Obligation.— Generally  speaking,  it 
seems  to  be  ** human  nature"  for  a  person  to  make 
more  strenuous  efforts  to  get  obligations  due  him  sat- 
isfactorily settled,  than  to  settle  his  own  obligations. 
There  is  nothing  that  will  injure  purchasing  more 
than  the  neglect  of  invoices  or  the  careless  and  ill- 
considered  treatment  of  them.  If  petty  and  trifling 
matters  are  made  to  look  momentous  and  important; 
if  attempts  are  made  to  enforce  unfair  claims;  if  un- 
just deductions  are  made;  if  cash  discounts  are 
abused;  or  if  payment  is  delayed  for  some  trivial  rea- 
son—the buyer  will  sooner  or  later  feel  the  effects  of 
such  a  policy. 

Loss  of  prestige  is  one  of  the  greatest  deterrents 
to  good  purchasing,  and  a  buyer  will  certainly  lose 


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154 


PURCHASING  AND  STORING 


prestige  if  he  adopts  any  of  the  methods  just  men- 
tioned. It  is  in  connection  with  invoices  that  the 
buyer's  principal  obligations  exist.  He  should  there- 
fore use  all  diligence  to  get  his  invoices  approved 
promptly.  When  differences  of  opinion  do  arise,  he 
should  handle  them  in  a  broad-minded,  capable  man- 
ner and,  while  insisting  on  a  just  and  proper  settle- 
ment, he  should  conduct  negotiations  without  friction 
or  bad  feeling.  This  policy  will  have  a  most  beneficial 
effect,  and  even  if  it  is  necessary  for  the  buyer  at 
some  time  to  make  some  slight  concession  he  will 
probably  gain  far  more  than  he  loses,  when  making 
additional  purchases. 

Invoices  and  Cash  Discounts.— An  understanding 
must  be  arrived  at  with  the  financial  department  in 
regard  to  the  time  required  for  it  to  do  its  part  in 
paying  an  invoice,  and  it  is  then  up  to  the  purchasing 
department  to  get  the  invoices  through  to  the  finan- 
cial department  in  ample  time.  When  this  has  been 
accomplished,  the  purchasing  department  has  done  its 
part  in  fulfilling  its  obligation. 

The  trouble  over  cash  discounts  and  the  abuse  of 
them,  is  rarely  the  fault  of  the  purchasing  depart- 
ment. The  understanding  with  the  seller  is  usually 
quite  clear,  and  claims  are  very  seldom  raised  in  con- 
nection with  cash  discounts  by  the  purchasing  depart- 
ment. The  financial  department  is  more  frequently  at 
fault  in  this  respect.  In  some  cases  it  may  be  lack  of 
adequate  finances  which  causes  that  department  to 
withhold  payment  for  a  few  days;  but  more  often 
it  is  because  the  financial  organization  does  not  fully 
recognize  the  importance   of   living  up  to   contract 


INVOICES 


155 


terms.  The  agreement  as  to  the  discount  is  part  of 
the  original  contract,  and  no  purchasing  agent  worthy 
of  the  name  would  for  one  moment  think  of  attempt- 
ing to  evade  contract  obligations — for  this  is  what 
the  abuse  of  cash  discounts  means. 

Other  departments,  however,  not  so  directly  and  in- 
timately in  contact  with  sellers  look  on  these  obliga- 
tions with  some  laxity.  The  production  department 
will  sometimes  want  to  postpone  or  change  delivery 
dates,  and  regard  such  procedure  very  lightly, 
whereas  it  really  may  involve  serious  consequences 
for  the  seller.  Likewise  the  financial  department  may 
look  with  indifference  on  a  delay  of  a  few^  days  in 
making  a  payment.  It  is  the  purchasing  department 
which  has  to  stand  between  these  departments  and 
the  seller  and  bear  the  brunt  of  any  blame  which  may 
result.  Such  incidents  are  not  conducive  to  good  buy- 
ing, in  view  of  their  effect  on  the  standing  which  the 
purchasing  agent  holds  with  the  sellers. 

It  may  be  asked  why  the  sellers  themselves  submit 
to  the  abuse  of  cash  discounts.  Some  of  them  do 
not;  they  will  promptly  return  any  checks  that  do 
not  arrive  on  time.  Nevertheless,  it  is  safe  to  say 
that  the  majority  of  them  do  acquiesce  in  these  trans- 
gressions— some  because  they  need  the  money,  and 
others  because  they  think  a  refusal  would  imperil 
their  relations  with  the  buyer. 

Sometimes  a  buyer  will  make  the  excuse  that  the 
goods  did  not  reach  him  within  ten  days,  and  that 
he  is  therefore  entitled  to  examine  them  before  pay- 
ing. The  buyer  knows  that  delivery  dates  are  uncer- 
tain when  the  time  required  for  transportation  cannot 


156 


PURCHASING  AND  STORING 


m 


always  oe  definitely  gauged.  He  knows  this  when 
he  makes  the  contract,  and  he  also  knows  that  it 
may  mean  paying  the  invoice  before  the  goods  are 
received.  If  such  an  arrangement  is  not  satisfactory 
to  him,  then  he  should  not  make  a  contract  on  this 
basis.  He  should  certainly  not  do  so  if  he  doubts 
the  probity  of  the  seller  to  such  an  extent  that  he 
feels  he  could  not  get  a  proper  adjustment  on  a  sub- 
sequent payment  if  there  should  be  any  discrepancies. 
Each  party  should  observe  the  provisions  of  the 
contract;  otherwise  confidence  is  impaired  and  sus- 
picion is  generated.  The  purchasing  agent  who  ex- 
periences serious  and  unaccountable  delays  in  the 
receipt  of  goods  may  oftentimes  trace  the  trouble 
to  slackness  in  financial  settlements,  resulting  in  pref- 
erences being  given  to  the  concerns  that  pay  most 
promptly. 

It  is  an  undoubted  fact  that  the  cash  discount  priv- 
ilege is  gradually  being  curtailed,  but  its  complete 
abolishment  is  still  a  long  way  off.  Probably  among 
the  causes  for  this  curtailment  the  most  prominent  is 
the  abuse  of  the  privilege  by  the  buyer  and  the  re- 
sultant controversies  with  the  seller,  with  tin*  result 
that  the  latter  is  left  with  a  large  numfeer  of  unbal- 
anced accounts. 


CHAPTER  VIII 
THE  PUKCHASING  AGENT 

Responsibility. — One  man  is  not  always  wholly  re- 
sponsible for  the  determination  of  all  the  factors  con- 
nected with  purchasing  for  an  industrial  establish- 
ment. Questions  regarding  quality  and  quantity  may 
be  determined  by  the  engineer  or  by  the  man  in 
charge  of  production,  but  the  responsibility  does  rest 
much  more  on  one  man  than  on  another.  The  devel- 
opments in  the  art  of  purchasing  have  increased  its 
importance  and  influence  as  a  business  function,  and 
have  brought  more  into  prominence  the  men  in  charge 
of  the  work.  They  now  hold  a  position  of  distinction 
and  consequence  in  commercial  undertakings. 

There  are  several  titles  in  use  for  the  men  in  charge 
of  purchasing.  Manager  of  Purchases,  Director  of 
Purchases,  and  other  forms  are  used  to  designate  the 
head  of  the  department,  but  the  title  most  generally 
adopted  is  Purchasing  Agent.  In  connection  with  this 
man's  work  the  following  is  quoted  from  an  address 
delivered  by  W.  G.  Besler,  President  of  the  Central 
Railroad  of  New  Jersey,  at  a  meeting  of  the  National 
Association  of  Purchasing  Agents. 

Have  we  taken  sufficient  account  of  the  potentialities  of  the 
purchasing  agent?  Has  he  been  sufficiently  recognized  as  a 
factor  in  our  daily  conferences,  and  do  we  appreciate  him  at 

157 


158 


PURCHASING  AND  STORING 


THE  PURCHASING  AGENT 


159 


his  full  worth  and  give  him  a  standing  commensurate  with 
that  to  which  he  is  entitled?  I  am  afraid  that  some  do  not 
place  a  sufficiently  high  standard  upon  the  position  of  the 
purchasing  agent.  At  least,  I  have  found  instances  which 
justify  the  thought  that  he  is  considered  a  sort  of  necessary 
nuisance  who  will  attend  to  the  filling  of  requisitions  and  the 
purchasing  of  material  which  other  departments  direct;  and 
he  has  been  regarded  more  in  the  light  of  an  amplified  clerk 
than  an  officer  of  the  company,  with  executive  ability  and  a 
keen  insight  into  the  affairs  of  the  concern.  A  man  who  is 
big  enough  to  be  entrusted  with  the  expenditure  of  vast  «ums 
amounting  to  hundreds  of  thousands  of  dollars,  is  also  big 
enough  to  be  taken  into  the  councils  of  the  executives. 

Qualifications. — Great  progress  has  been  made  in 
purchasing  during  recent  years.  In  view  of  this  fact, 
it  is  unfortunate  that  while  the  character  and  type 
of  some  purchasing  agents  have  necessarily  made 
their  positions  ones  of  recognized  importance  and  au- 
thority, there  have  been  too  many  who  wer(^  simply 
** order-placers.''  These  conditions  are  fast  changing, 
however,  and  to-day  there  is  no  reason  why  a  man 
should  be  holding  the  title  of  purchasing  agent  whose 
duties  merely  consist  in  keeping  records  of  purchases, 
orders  issued,  goods  received,  and  invoices  checked. 
In  industrial  organizations  there  is  ample  scope,  be- 
yond the  mere  clerical  features  connected  with  the 
work,  for  the  activities  of  the  man  in  charge  of  pur- 
chasing. To  develop  the  purchasing  function  and 
maintain  it  at  its  highest  plane  of  usefulness,  it  is 
necessary  to  have  a  man  with  certain  qualifications. 

This  man,  first  of  all,  should  have  good  judgment, 
and  should  be  well-balanced,  shrewd,  sagacious,  and 
well-fortified  with  the  particular  knowledge  essential 
in  his  work.    He  should  also  have  an  appreciation  of 


values.  This  does  not  mean  simply  a  knowledge  of 
prices — a  knowledge  of  values  is  of  far  more  con- 
sequence and  importance,  and  implies  a  vast  fund  of 
information  for  their  accurate  determination.  He 
must  have  a  broad  viewpoint.  He  should  always 
posses^  executive  ability;  modern  purchasing  requires 
a  purchasing  agent  who  can  deal  with  the  executives 
of  an  organization  more  or  less  on  their  own  level. 
He  should  be  able  to  make  others  recognize  the  true 
importance  of  his  position,  and  he  should  be  capable 
of  carrying  on  his  w^ork  in  its  relation  to  the  various 
functions  of  the  industrial  organization. 

The  purchasing  agent  should  by  all  means  be  ana- 
lytical. The  analysis  of  values  is  a  primary  factor  in 
good  purchasing.  He  should  have  the  ability  and  the 
knack  of  analyzing  information  regarding  values  un- 
til he  has  brought  to  light  every  pertinent  fact  and 
exhausted  every  possible  means  of  securing  further 
knowledge  from  the  available  records.  This  require- 
ment is  probably  the  main  reason  why  we  hear  so 
much  today  of  purchasing  engineers — not  because  of 
their  engineering  education  particularly,  but  because 
they  have  been  trained,  as  a  rule,  to  analyze  to  the 
minutest  details. 

Coupled  with  the  power  of  analysis  the  purchasing 
agent  should  have  a  talent  for  comparison,  because 
through  comparison  he  obtains  to  a  large  extent  his 
true  estimate  of  values. 

He  should  be  aggressive,  because  it  is  often  neces- 
sary for  him  to  impress  his  views  not  only  on  all  the 
units  of  the  organization,  but  on  sellers  as  well.  He 
should  be  progressive,  and  should  have  considerable 


Ml 


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THE  PURCHASING  AGENT 


161 


f 


initiative  and  originality,  inasnmcli  as  a  great  many 
of  the  facts  he  presents  should  come  from  him  un- 
solicited. 

He  should  be  resourceful,  for  he  may  often  be  re- 
quired to  prove  certain  data  and  facts  different  from, 
or  in  addition  to,  his  regularly  recorded  information, 
and  unless  he  is  awake  to  every  opportunity  he  may 
not  know  from  what  sources  to  secure  it,  or,  knowing 
these,  may  not  know  how  to  procure  it. 

He  should  have  imagination,  in  order  that  he  may 
visualize  and  intelligently  undt'rstand  the  conditions 
which  are  portrayed  and  represented  by  the  avenues 
of  information  on  business  conditions  which  are  avail- 
able for  everyday  reference. 

Breadth  and  Vision. — It  must  be  admitted  that 
many  purchasing  agents  in  industrial  establishments 
have  not  the  status  which  the  importance  of  their 
work  warrants.  The  explanation  is  that  those  pur- 
chasing agents  who  have  not  received  this  full  recog- 
nition are  lacking  in  breadth  and  vision.  Large  ques- 
tions come  for  them  to  answer,  yet  they  cjumot  see 
beyond  their  daily  routine  work. 

This  lack  of  breadth  means  that  when  some  really 
important  matter  comes  up  such  a  purchasing  agent 
has  to  report  to  some  executive,  who  may  take  the 
matter  out  of  his  hands.  The  purchasing  agent  needs 
a  viewpoint,  an  outlook,  which  shall  embrace  the 
whole  organization,  its  mission,  and  its  destiny.  If 
he  has  this,  he  will  not  become  narrow — and  narrow- 
ness is  probably  the  prevailing  fault  of  present-day 
purchasing  agents.  It  is  perhaps  unfair,  however,  to 
single  out  purchasing  agents  and  stigmatize  them 


with  this  fault,  because  it  is  common  to  many  other 
men  who  specialize  in  a  single  business  function. 

Like  all  specialists,  the  purchasing  agent  is  apt  to 
confine  himself  too  closely  to  his  own  particular  work. 
He  will  follow  prices  closely,  keep  in  touch  with  sup- 
ply sources,  get  deliveries  promptly,  and  constantly 
strive  to  perfect  himself  in  all  those  things  which 
make  for  skillful  buying  and  the  reputation  of  his 
department.  But  in  doing  this  he  may  overlook  the 
broad  policy  of  the  establishment,  with  which  his 
work  should  be  in  accord.  He  is  apt  to  sacrifice  qual- 
ity for  price;  he  may  overlook  the  importance  of 
having  every  department  working  in  harmony  with 
the  others;  he  may  not  see  the  value  of  price  in  its 
true  proportion. 

Why  do  salesmen  often  try  to  get  a  hearing  with 
an  executive,  **over  the  head''  of  the  purchasing 
agent,  especially  if  they  have  goods  of  merit  to  offer? 
They  realize  that  they  will  receive  broader  treatment, 
that  the  executive  will  give  due  consideration  to  all 
sides  of  the  question,  and  will  view  price,  quantity, 
delivery,  service,  and  so  on,  in  their  true  perspective. 
But  a  salesman  will  never  go  beyond  the  purchasing 
agent's  office  if  he  meets  there  the  man  who  can 
weigh  all  these  points  judicially  and  fairly,  and  give 
good  judgment  on  the  facts  presented  and  on  the 
knowledge  he  has  of  the  general  policy,  aims,  and 
ambitions  of  the  concern. 

Vendors  and  their  salesmen  and  representatives  are 
quite  often  quicker  to  sense  the  general  policy  of  the 
houses  to  which  they  sell  than  the  men  actually  doing 
the  buying;  or,  if  this  is  not  the  case,  they  sometimes 


162 


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THE  PURCHASING  AGENT 


163 


I 


have  a  viewpoint  which  covers  a  larger  range  of  vi- 
sion than  that  of  the  buyer.  It  is  essential,  therefore, 
that  they  be  given  a  hearing,  and  that  their  state- 
ments be  weighed  and  calibrated.  Granted  that  many 
times  suggestions  and  propositions  which  they  make 
are  not  worthy  of  consideration,  nevertheless  in  the 
long  run,  taking  the  good  with  the  bad,  the  purchas- 
ing agent  is  the  gainer. 

Finance  and  the  Buyer.— The  average  business  man 
is  apt  to  spurn  information  on  things  financial  as  im- 
practical theory,  but  a  purchasing  agent  should  be 
financially  weather-wise.  For  the  successful  buyer  no 
information  is  too  slight  to  be  disregarded,  and  in- 
formation regarding  financial  affairs  is  particularly 
applicable  to  purchasing. 

Many  materials  are  stable  in  price,  irrespective  of 
financial  conditions.  But  there  are  also  many  for 
which  there  is  a  sensitively  fluctuating  market,  and 
these  will  be  distinctly  affected  by  changing  financial 
conditions.  There  is  certain  information  from  which 
can  be  deduced  a  principle  for  general  application  for 
such  material. 

If  a  purchasing  agent  knows  during  what  periods 
of  the  year  there  is  a  large  demand  for  money,  and 
during  what  periods  the  demand  is  slight,  he  has  par- 
tially solved  the  question  as  to  what  time  of  year, 
under  normal  conditions,  it  is  wise  to  buy  or  sell. 

The  causes  affecting  the  level  of  prices  of  sensi- 
tively fluctuating  materials  are  not  simple.  Some  of 
these  causes — of  which  one  is  the  supply  of  money — 
recur  regularly,  though  the  intensity  of  their  effect 
is  variable.    The  forehanded  buyer  will  seek  to  recog- 


nize these  causes,  to  judge  their  intensity,  and  finally 
to  learn  to  modify  his  conclusions  concerning  their 
abnormal  occurrences  in  times  of  great  business  ac- 
tivity, as  during  wars  or  when  there  are  rumors  of 
war. 

Management  and  Administration.— The  purchasing 
agent  should  understand  both  of  these  terms,  because 
he  must  both  manage  the  purchasing  and  his  depart- 
ment, and  administer  the  policies  of  the  organization, 
in  so  far  as  they  affect  his  work  and  also  the  minor 
policies  of  his  department.  Management  is  a  think- 
ing job  and  lays  down  general  policies,  while  admin- 
istration accepts  these  policies  as  orders  and  trans- 
lates them  into  specific  action. 

The  organization  and  management  of  a  purchasing 
department  call  for  very  much  the  same  qualities  as 
the  organization  and  management  of  a  business. 
Many  business  men  seek  success  in  management 
through  methods  and  systems,  or  by  means  of  what 
is  called  efficiency,  or  scientific  management.  These 
compel  the  mind  to  revert  to  some  perfectly  modeled 
plans  or  processes  which  are  supposed  to  straighten 
out,  as  by  magic,  all  kinks,  worries  and  troubles. 

Thinking  business  men  know  better,  and  have  long 
since  abandoned  the  hope  that  mere  methods  and 
systems  will  of  themselves  accomplish  anything,  but 
they  do  know  that  scientific  organization,  intelligent 
analysis,  and  constructive  thought  will  lead  to  greatly 
improved  conditions  if  accompanied  by  something 
more  than  mere  mechanical  processes  and  changes. 
In  other  words,  there  must  be  vision  and  purpose, 
high  ideals,  loyalty,  and  service. 


164 


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THE  PURCHASING  AGENT 


165 


The  purchasing  agent  must  be  the  guide  and  in- 
spiration of  his  department  and  must  assist  in  the 
formulation  of  the  purchasing  policies.  If  he  is  *a 
man  of  vision,  a  man  who  is  broad  enough  to  forecast 
and  visualize  possibilities;  if  the  commanding  figure 
is  thoroughly  imbued  with  ideals  of  business  of  the 
highest  type;  and  if  he  makes  purposeful  (efforts  to 
put  them  into  effect— then  a  purpose  of  similar  char- 
acter will  permeate  his  assistants,  and  the  smaller 
matters  of  detail — installing  systems  and  methods — 
will  become  simply  matters  of  form. 

Psychology  in  Purchasing.— Buyers  and  salesmen 
are  diametrically  opposed  in  a  commercial  sense.  There 
must  be  some  expression  of  this  opposition,  and  the 
manner  of  the  expression  will  be  governed  largely  by 
the  intelligence  of  the  individual,  particularly  in  the 
outward  impression  conveyed.  Nobody  can  commend 
antagonism  which  can  never  do  any  good  and  may  do 
much  harm.  On  the  contrary,  a  display  of  good  feel- 
ing, even  if  it  is  fictitious,  can  do  no  harm  even  if 
it  may  do  no  good.  The  purchasing  agent  and  the 
seller  serve  conflicting  interests  and  are  continually 
at  war,  but  their  feeling  toward  each  other  may  be  of 
the  most  cordial  type,  and  based  on  the  friendliest 
relations.  The  motives  of  sellers  are  never  altruistic, 
however  much  they  may  so  claim.  It  is  well  to  re- 
member that  all  sales  are  made  for  profit. 

A  salesman  desires  to  produce  an  effect.  What  is 
the  basic  cause  of  it  f  The  buyer  *s  psychology  will  com- 
pel him  to  search  for  the  cause.  If  the  explanation  is 
that  the  salesman  wishes  to  convey  the  impression 
that  his  product  has  the  same  qualities  as  those  of 


his  competitor — or  better  qualities — and  yet  is 
cheaper,  the  purchasing  agent  has  to  decide  whether 
his  statement  is  authentic,  or  whether  it  is  made  as 
an  inducement  because  of  the  type  of  man  the  seller 
is  dealing  with.  An  easily  influenced  mind  would 
yield  to  a  well-directed  verbal  attack,  but  the  intelli- 
gent person  will  investigate  the  reason  why  the  state- 
ment was  made.  Such  an  analytical  investigation 
may  sometimes  reveal  extreme  inconsistencies  in  what 
the  seller  says. 

Reducing  the  Cost  of  Salesmanship. — A  concern 
that  spends  a  large  amount  of  money  in  investigating, 
testing,  and  developing  the  materials  for  use  in  pro- 
duction work,  until  it  has  procured  the  raw  material 
exactly  suited  to  its  requirements,  does  this  for  many 
reasons.  One  of  the  principal  reasons  is  that  the 
firm  wishes  to  obviate  the  necessity  of  the  seller's 
making  such  tests  for  the  buyer,  with  their  attendant 
uncertainties.  Moreover,  the  concern  realizes  that  all 
work  of  this  nature  done  by  the  seller  increases  the 
cost  of  the  material  for  the  buyer. 

The  purchasing  agent  plays  an  important  part  in 
this  development  work.  The  greater  his  knowledge  of 
his  purchases,  the  less  need  is  there  for  expensive 
salesmanship.  Many  buyers  are  paying  for  a  sales- 
manship service  that  they  do  not  need.  A  readjust- 
ment must  come  with  the  higher  education  of  the  pur- 
chasing agent,  and  also  in  those  cases  where  the  tech- 
nical experts  in  his  own  organization  have  fully  sat- 
isfied themselves  of  the  merits  and  desirability  of  cer- 
tain materials  and  articles.  The  readjustment  may  be 
slower  in  some  industries  than  in  others,  but  indus- 


!r! 


166 


PURCHASING  AND  STORING 


THE  PURCHASING  AGENT 


167 


trial  organizations  generally  should  be  in  the  lead  in 
this  development. 

There  should  be  some  concessions  to  those  concerns 
that  employ  engineering  talent  in  order  to  determine 
in  an  accurate,  scientific  way  the  merits  of  anything 
they  propose  to  buy.  In  other  words,  the  buying  con- 
cern— through  the  talent  of  its  purchasing  agent,  or 
through  its  technical  staff,  or  both— prefers  to  pay 
the  cost  of  this  determination  and  to  arrive  at  the  re- 
sult by  scientific  means  under  its  own  control. 

Technical  Information. — A  technical  education  is 
naturally  a  great  advantage  for  a  purchasing  agent 
of  an  industrial  establishment,  but  if  this  is  secured 
by  sacrificing  other  forms  of  education  equally  essen- 
tial, or  more  so,  to  a  successful  buyer,  then  nothing 
is  gained  by  it.  There  are  many  engineers,  architects, 
and  professional  men  whose  technical  training  and 
ability  enable  them  to  take  first  rank  in  their  respec- 
tive professions,  but  whose  commercial  success  is 
negligible,  simply  because  they  have  no  talent  in  that 
particular  direction.  The  lawyers  who  amass  large 
fortunes  are  not  those  who  can  best  expound  knotty 
legal  problems,  but  those  who  can  comprehtrnd  and 
grasp  the  commercial  and  financial  problems  of  large 
corporations,  or  similar  problems  in  the  administra- 
tion of  large  estates  and  trusts. 

A  new  title  is  creeping  into  existence — the  **  pur- 
chasing engineer."  There  are  probably  a  great  many 
who  should  bear  the  title,  but  who  are  still  disguised 
as  buyers  or  purchasing  agents.  Such  men  are  inval- 
uable if  they  have  broad  experience  as  ex(^cutives, 
if  their  commercial  education  is  of  the  kind  that  can 


meet  all  contingencies,  and  if  their  technical  knowl- 
edge of  their  own  particular  purchases  is  comprehen- 
sive and  practical.  There  are  sales  engineers  galore. 
It  is  now  considered  an  essential  part  of  a  sales- 
man's equipment  to  be  technically  trained.  But  quite 
frequently  these  men  need  technical  education  only  in 
one  line,  whereas  a  purchasing  agent  needs  a  much 
broader  training,  for  he  has  to  buy  a  multitude  of 
things,  even  if  his  concern  manufactures  a  limited 
number  of  articles. 

It  may  not  be  the  province  of  the  purchasing  agent 
to  determine  technical  questions,  or  even  to  select 
quality,  but  if  he  can  do  so,  or  give  valuable  assist- 
ance to  those  who  do,  he  is  to  that  extent  more  val- 
uable to  his  concern  and  of  great  assistance  in  its 
economical  developments  and  operations. 

Policy. — The  policy  of  the  purchasing  agent  will 
naturally  be  the  same  as,  or  similar  to,  that  of  the  es- 
tablishment with  which  he  is  associated,  but  there  are 
minor  policies  connected  with  his  work  and  his  de- 
partment which  every  purchasing  agent  can  formu- 
late for  himself.  If  he  finds  that  these  conflict  with 
the  general  policy  of  the  organization,  he  can  bring 
them  to  the  attention  of  the  proper  executives,  and 
if  his  policies  are  big  and  broad  enough,  and  worthy 
of  being  adopted,  they  will  probably  find  a  ready  ac- 
ceptance. They  will  also  serve  to  enhance  the  repu- 
tation and  standing  of  the  author  of  them,  for  all 
organizations  are  looking  for  men  who  can  formulate 
policies  of  this  character. 

Since  the  purchasing  agent's  department  exists  to 
supply  the  material  needs  of  the  other  departments 


I 


168 


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THE  PURCHASING  AGENT 


169 


i\ 


pmi'f 


of  an  organization,  it  is  essential  that  he  cultivate 
cordial  relations  with  other  dei)artment  heads.  It'  he 
does  so,  the  many  petty  differences  and  frictions  that 
are  apt  to  arise  between  inter-department  employees, 
can  be  controlled  and  smoothed  out  before  they  de- 
velop situations  which  could  in  the  least  impair  the 
efficiency  of  any  department. 

Friendly  relations  should  be  established  with  all 
those  concerns  with  which  orders  are  placed  and  with 
which  negotiations  are  conducted.  Men  will  often  do 
for  friendship  what  they  will  not  do  for  financial 
gain.  A  policy  of  recognized  merit  adopted  and  main- 
tained as  a  standard  with  every  concern  the  purchas- 
ing agent  comes  in  contact  with,  will  secure  valuable 
and  permanent  advantages  in  all  his  transactions 
with  them. 

Authority. — There  should  be  a  clear  definition  of 
the  purchasing  agent's  authority.  He  is  virtually  in 
control  of  a  situation  in  which  he  can  obligate  his 
concern  for  very  large  amounts,  for  he  can  sign  con- 
tracts and  orders  involving  large  expenditures.  In 
this  respect  he  can  be  compared,  to  a  certain  extent, 
with  the  treasurer.  Would  any  concern  permit  its 
treasurer  to  sign  checks  and  other  obligations  with- 
out proper  voucher  certificates  or  other  accredited 
authorization  ? 

In  the  first  place,  no  purchase  should  ever  be  made 
without  a  requisition.  This  is  the  purchasing  agent's 
authorization.  These  requisitions  must  be  proi)erly 
drawn,  and  signed  by  department  heads  or  other  per- 
sons empowered  and  designated  by  the  proper  officials 
to  do  so. 


With  these  documents  in  his  office,  duly  authenti- 
cated, a  purchasing  agent  could — but  no  real  pur- 
chasing agent  would — throw  aside  all  responsibility. 
The  man  who  is  alive  to  the  necessities  of  the  con- 
cern, who  has  its  interests  at  heart  and  takes  pride 
in  administering  the  purchasing  function,  will  scruti- 
nize requisitions  as  much  for  under-buying  as  for 
over-buying.  Market  conditions  are  an  important  fac- 
tor in  determining  the  quantity  to  buy,  and  it  may  be 
necessary  to  make  recommendations  on  this  point  to 
the  party  who  signed  the  requisition. 

When  large  expenditures  have  to  be  made  for  ma- 
chinery and  equipment,  it  would  probably  be  neces- 
sary to  get  an  authorization  from  the  directors.  If 
exceptionally  large  purchases  have  to  be  made  for  the 
execution  of  a  contract  into  which  the  concern  has 
entered,  it  may  be  necessary  to  consult  with  the  sales 
manager  and  with  the  man  in  charge  of  the  finances. 
Some  definite  scheme  should  be  outlined,  and  a  plan 
should  be  laid  out  by  every  establishment,  governing 
the  purchasing  agent's  authority.  It  is  not  wise,  how- 
ever able  a  man  may  be,  to  throw  the  onus  of  respon- 
sibility on  him,  neither  is  it  wise  to  place  it  with  some 
irresponsible  foreman. 

Natural  Aptitude. — Neither  intuition,  nor  natural 
aptitude,  nor  the  ** buying  instinct,"  will  of  itself 
alone  develop  a  successful  buyer  for  an  industrial  es- 
tablishment. Different  degrees  of  capability  exist  in 
different  persons.  The  proper  qualifications  are 
largely  acquired  by  association  with  the  work  of  buy- 
ing, but  scientific  methods  and  research  work  are  nec- 
essary.   Successful  purchasing  agents  do  not  rely  on 


170 


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THE  PURCHASING  AGENT 


171 


inherent  knowledge,  but  upon  that  which  is  acquired. 
The  tinal  decision  made  by  credit  men  in  some  cases 
is  largely  based  on  instinct  or  intuition.  It  is  true 
that  purchasing  agents  often  close  a  deal  satisfac- 
torily on  this  basis,  but  they  depend  mainly  on 
scientifically  acquired  knowledge.  And  it  must  be  re- 
membered that  there  is  no  finality  to  this  work.  It 
has  been  aptly  said  that  **  acquired  knowledge  is  only 
elementary  compared  with  the  vast  fund  of  informa- 
tion which  is  yet  undiscovered.'* 

From  what  has  already  been  stated — in  Chapter  II, 
on  ** Specifications" — it  might  seem  that  the  purchas- 
ing agent  is  so  restricted  in  respect  to  what  he  shall 
buy  that  nothing  is  left  to  his  imagination  and  very 
little  to  his  judgment.  To  be  sure,  in  the  cas(i  of  cer- 
tain material  the  purchasing  agent's  work  is  princi- 
pally a  matter  of  specializing  on  price  and  delivery, 
since  the  question  of  what  to  buy  has  been  prede- 
termined by  exhaustive  practical  experiments,  the  re- 
sults of  which  are  contained  in  the  standard  specifica- 
tions furnished  to  him,  which  he  uses  in  canvassing 
the  market  and  placing  his  orders.  It  must  not  be 
inferred,  however,  that  his  work  is  merely  clerical, 
for  it  is  necessary  for  him  to  know  something  of  the 
material  that  he  is  buying,  and  of  the  antecedent 
manufaieturing  processes  through  which  it  has  passed. 

If  the  purchasing  agent's  work  were  strictly  con- 
fined within  these  limits,  his  outlook  would  be  de- 
cidedly curtailed,  but  an  interesting  and  important 
field  of  work  would  still  be  left  him.  However,  there 
is  no  reason  why  his  activities  should  be  r(istricted 
within  such  limitations. 


Wider  Field  for  the  Purchasing  Agent.— I  have  em- 
phasized in  previous  chapters  the  fact  that  the  pur- 
chasing agent  should  be  the  final  arbiter  in  the  con- 
duct and  conclusion  of  all  negotiations  regarding 
price,  terms,  and  delivery  of  all  material  for  which 
he  has  requisitions.  If  he  is  a  man  who  has  a  broad 
conception  of  his  nob,  there  is  a  larger  field  for  him. 
For  example,  he  may  be  consulted  in  regard  to  capital 
outlays.  In  this  connection  his  knowledge  of  prevail- 
ing financial  conditions,  the  causes  which  have  brought 
these  conditions  about,  and  the  probable  future  ten- 
dency, will  be  of  service.  And  this  knowledge  is  val- 
uable in  arriving  at  a  decision  as  to  the  advisability, 
the  manner,  and  the  most  opportune  time  to  make  an 
investment,  whether  it  is  in  additional  real  estate,  a 
new  building,  or  better  facilities  for  carrying  on  the 
undertaking. 

So  a  very  wide  area  of  research  work  opens  up  for 
the  purchasing  agent,  and  there  is  unlimited  scope 
for  the  acquirement  of  knowledge  useful  in  his  sphere 
of  endeavor.  Getting  prices  and  information  on  ma- 
terials needed,  or  known  to  be  in  immediate  prospect, 
is  only  part  of  the  work  of  the  purchasing  agent  who 
keeps  abreast  of  the  times.  He  should  be  constantly 
absorbing  information  that  will  protect  him  against 
emergencies  and  ripen  his  judgment  in  the  larger  mat- 
ters he  rnay  be  called  upon  to  decide. 

A  purchasing  agent  is  employed  to  save  money.  He 
accomplishes  savings  through  his  knowledge  of  ma- 
terials and  markets,  coupled  with  the  ability  to  dis- 
cover and  select  sources  that  can  most  advantageously 
furnish  the  requirements  of  the  business. 


I  •! 


172 


PURCHASING  AND  STORING 


^  There  is  an  inherent  satisfaction  in  bringing  nego- 
tiations to  a  successful  conclusion  and  closing  a  pur- 
chasing transaction  satisfactorily.  The  work  is  inter- 
esting, and  the  interest  is  heiglitened  by  the  breadth 
of  the  field  it  opens  up  for  research  work  and  the 
constant  changes  that  take  place  in  all  classes  of 
goods.  Owing  to  the  complexity  of  manufacturing 
industries,  the  finished  product  of  one  manufacturer 
IS  the  raw  material  for  another. 


CHAPTER  IX 
THE  PURCHASING  DEPARTMENT 

Origin  and  Mission.— There  is  no  manufacturing 
process  so  simple  that  it  does  not  require  for  the 
production  work  of  its  factory  certain  raw  materials, 
and  usually  a  large  variety  of  tools  and  supplies. 
Other  supplies  and  articles  are  needed  by  every  sec- 
tion of  an  establishment,  and  it  has  long  since  been 
recognized  that  the  responsibility  for  procuring  them 
should  be  centralized.  The  organization  of  business 
concerns  into  departmental  formation  demanded  that 
the  buying  function  should  be  recognized—therefore 
the  purchasing  department  was  created. 

The  segregation  of  purchasing  has  important  eco- 
nomic advantages.  It  has  been  found  that  a  depart- 
ment specializing  on  market  conditions,  price,  quality, 
service,  and  delivery,  can  obtain  better  results  than 
can  be  secured  through  the  division  and  decentrali- 
zation of  the  work.  Such  an  arrangement,  moreover, 
enables  all  other  departments  of  an  establishment  to 
devote  their  whole  time  to  their  special  functions  and 
activities. 

All  the  material  needs  of  an  establishment  should 
be  obtained  through  the  purchasing  department.  No 
exception  of  any  kind  should  be  made.  Everything  in 
the  way  of  equipment,  tools,  supplies  of  all  kinds— in- 

173 


fl«i 


11 


174 


PURCHASING  AND  STORING 


PURCHASING  DEPARTMENT 


175 


eluding  coal,  oils,  stationery,  printing  and  so  on— is 
included  under  **material  needs.''  The  practice  of 
some  executives,  of  permitting  some  of  the  minor 
supplies  to  be  purchased  by  the  departments  using 
them  is  too  common  and  cannot  be  commended.  The 
principal  purchasing  work  in  industrial  establish- 
ments is,  of  course,  connected  with  procuring  the  ar- 
ticles, goods,  and  commodities  which  actuall)-  consti- 
tute the  raw  material  for  production  work,  oi-  which, 
at  least,  are  spoken  of  as  such.  It  is  essential  that 
all  supplies  should  pass  through  the  department;  oth- 
erwise standardization  cannot  be  maintained. 

Standardizing  Supplies.— It  may  be  noticed  that 
those  concerns  which  have  been  in  existence  for  some 
time,  and  which  have  permitted  the  purchase  of  sup- 
plies through  individuals  in  different  departments 
have  a  promiscuous  assortment  and  a  bewildering  ar- 
ray of  articles.  Standardization  of  all  office  equip- 
ment, stationery,  and  all  supplies  used  through  the 
factory  can  be  effected  more  readily  through  the  pur- 
chasing department  than  through  any  other  medium, 
because  it  is  the  clearing  house  for  all  requisitions. 
Economical  considerations  and  questions  of  conve- 
nience should  compel  attention  to  this  fact.  Certainly 
better  prices  can  be  obtained  if  standard  articles  are 
bought  which  can  be  used  in  any  department.  The 
advantages  also  of  their  interchangeability  should  not 
be  overlooked.  There  is  no  logical  reason  why  any 
purchasing  of  this  nature  should  be  subject  to  the 
vagaries  and  personal  preferences  of  persons  in  vari-. 
ous  departments.  The  good  of  the  whole  establisli- 
ment  should  be  the  paramount  consideration. 


In  small  industrial  concerns  the  purchasing  depart- 
ment can  often  be  largely  instrumental  in  standardiz- 
ing much  of  the  material  as  well  as  the  supplies — es- 
pecially if  a  technical  staff  is  not  employed  to  do  it. 
This  subject  was  covered  in  Chapter  II  in  the  discus- 
sion of  standard  definitions. 

Relations  With  Other  Departments.— -The  purchas- 
ing department  exists,  as  a  unit,  in  an  organization 
to  supply  the  needs  of  the  other  units.  The  attitude 
of  the  other  departments  will  be  a  reflection  of  the 
purchasing  department's  service  to  them,  and  to  a 
large  extent  the  standard  by  which  its  efficiency  will 
be  measured. 

The  staff  must  be  in  sympathy  with  the  particular 
requirements  of  the  users  of  the  material,  or  they  will 
fail  to  grasp  one  of  the  most  essential  ideas  in  con- 
nection with  the  purchasing  department.  Just  receiv- 
ing requisitions,  placing  orders,  and  checking  invoices 
is  simply  dealing  with  papers  and  accounts.  Dealing 
with  men  and  things  inspires  all  employees  with  a 
different  spirit  in  their  work. 

Every  purchasing  agent  has  had  the  experience  of 
being  told  what  is  thought  of  his  department  when 
delays  occur  in  getting  delivery  of  some  much  needed 
material.  It  is  assumed  at  once  that  the  department 
is  entirely  unsympathetic  with  the  legitimate  aims  of 
other  departments.  There  is  an  appreciable  resultant 
gain  from  the  maintenance  of  harmonious  relations 
between  departments.  The  exercise  of  tact,  discre- 
tion, and  diplomacy  by  the  heads  of  departments  will 
establish  and  continue  such  relations,  and  it  is  no 
exaggeraton  to  say  that  vast  sums  are  lost  where  they 


176 


PURCHASING  AND  STORING 


PURCHASING  DEPARTMENT 


177 


do  not  exist.  The  purchasing  department  is  in  con- 
stant contact  with  other  departments,  and  co-operation 
and  mutual  confidence  are  absolutely  essential.  The 
question  is  merely  one  of  being  able  to  meet  and  han- 
dle the  peculiarities  and  prejudices  of  human  nature. 

If  there  are  points  of  contact  where  there  is  any 
question  of  the  work  overlapping  that  of  another  de- 
partment, the  duties  of  each  should  be  clearly  defined 
and  arranged  on  the  basis  of  the  best  interests  of  the 
whole  establishment  being  served.  Friction  and  the 
clashing  of  authority  are  in  this  way  avoided,  and  the 
smooth  working  of  the  various  activities  is  much  fa- 
cilitated. 

Departmental  Meetings.— The  best  antidote?  for  mis- 
understandings is  understanding,  and  this  can  best  be 
brought  about  through  departmental  meetings.  If 
there  are  a  large  number  of  em})loyees,  these  meetings 
will  be  found  very  helpful  in  the  allocation  and  as- 
signment of  work.  It  will  often  be  found  at  meet- 
ings of  this  kind  that  the  work  is  unevenly  distrib- 
uted. Temporary  causes  may  be  the  occasion  for  this, 
and  if  a  temporary  re-alignment  of  the  work  can  be 
made  to  relieve  the  situation  a  great  deal  of  good  will 
be  accomplished.  Proofs  of  this  stateme^nt  were 
plentiful  during  the  strenuous  periods  brought  about 
through  the  war,  when  it  was  exceedingly  difficult  to 
get  shipment  of  certain  materials.  By  the  rearrange- 
ment of  work  and  the  assignment  of  more  help  co 
follow  it  up,  great  improvement  has  been  effected. 

It  is  not  always  possible,  of  course,  for  the  head 
of  a  department  to  divide  the  work  in  such  a  manner 
that  each  section  of  the  department  will  have  the 


same  volume  to  handle.  When  consultation  is  held 
with  each  section  independently,  naturally  a  distorted 
viewpoint  is  often  obtained;  but  joint  consultation 
will  remedy  this  trouble. 

Compiling  Records. — Intelligent  records  are  a  part 
of  every  successful  purchasing  department;  the  na- 
ture of  these  records  has  been  treated  fully  in  Chap- 
ters II,  III,  IV,  and  VII.  The  records  should  be 
reliable  and  accurate.  Although  records  may  be  a 
part  of,  and  an  aid  to,  efficiency,  they  do  not  in  any 
sense  insure  efficiency.  Accurate  records  may  be  col- 
lected and  used  without  any  resultant  efficiency,  and, 
on  the  other  hand,  a  certain  amount  of  efficiency  may 
be  secured  without  the  use  of  records.  There  is  no 
doubt,  however,  that  accurate  records,  make  for  the 
development  of  efficiency  in  the  purchasing  depart- 
ment. 

Eecords  must  take  note  of  existing  surrounding  con- 
ditions. There  are  elements  which  are  ever  present, 
causing  continuous  changes  in  business  conditions  and 
markets,  and  the  compilation  of  records  concerning 
them  must  be  governed  by  experience  and  common 
sense.  A  qualified  member  of  the  department  should 
have  charge  of  collecting  all  the  necessary  data. 

These  records  do  not  only  portray  the  market  con- 
ditions and  fluctuations  in  prices,  to  which  reference 
has  been  made  in  previous  chapters,  but  they  are 
needed  as  an  aid  in  the  direction,  arrangement,  and 
control  of  purchases,  in  order  that  without  an  undue 
accumulation  of  materials  there  may  be,  at  all  times, 
sufficient  stock  on  hand  to  enable  the  production  de- 
partment to  maintain  its  activities  uninterrupted. 


1 


178 


PURCHASING  AND  STORING 


Tlie  requisitions,  as  they  arrive  in  the  department, 
will  give  the  exact  quantities  required.  Delivery 
dates  should  be  specified  on  the  requisitions,  but  it  is 
essential  for  the  department  to  keep  a  record  of  past 
purchases  in  respect  to  both  quantities  and  prices. 
Other  departments  may  send  in  estimates  of  future 
requirements,  although  unaccompanied  by  actual 
requisitions,  and  these  will  need  to  be  rec(»rded  and 
tabulated. 

Relations  With  Sellers.— Owing  to  the  nature  of  the 
activities  of  the  purchasing  department,  the  members 
are  brought  frequently  into  contact  with  the  represen- 
tatives of  the  sellers.  Most  of  these  are  salesmen,  but 
the  follow-up  section  of  the  department  gets  into 
touch  with  the  persons  in  charge  of  shipm(»nts,  and 
the  invoice  division  has  communications  and  inter- 
views with  the  vendor's  accountants  and  financial 
men. 

The  policy  of  the  purchasing  department,  as  dis- 
played in  its  intercourse  with  outside  conci^rns,  will 
have  considerable  influence  on  purchasing  efficiency. 
It  is  unfortunately  a  prevailing  custom  to  adopt  a 
different  attitu<le  towards  firms  and  individuals  from 
whom  orders  are  expected,  than  towards  those  to 
whom  orders  are  given.  If  the  sales  department  con- 
siders it  an  essential  part  of  its  policy  to  treat  with 
courtesy  and  consideration  all  customers,  (4ther  in 
personal  interviews  or  in  written  communications,  it 
is  an  equally  essential  part  of  the  policy  of  the  pur- 
chasing department  to  adopt  a  similar  attitude  in 
their  dealings  with  salesmen  and  in  their  communica- 
tions with  sellers.    Unless  this  is  done,  it  is  exceed- 


FURCHASING  DEPARTMENT 


171) 


ingly  difficult  to  get  the  best  results  in  purchasing. 
Every  purchasing  department  has  some  callers  who 
are  perhaps  not  welcome  callers,  and  probably  every 
sales  department  has  some  customers  it  could  just  as 
well  do  without.  There  are  all  kinds  of  salesmen,  and 
some  of  them  will  always  think  they  are  not  getting 
a  square  deal.  Many  purchasing  departments  keep  a 
record  of  salesmen's  visits,  and  this  is  sometimes  good 
practice,  because  it  enables  one  to  check  up  the 
progress  of  negotiations  should  it  become  necessary 
because  of  disputes  concerning  dates  of  quotations 
and  the  persons  by  whom  they  were  made.  It  is  also 
useful  in  discouraging  visits  from  over-zealous  and 
undesirable  salesmen.  Forms  for  recording  sales- 
men's visits  are  given  in  Figure  27. 


RECORD  OF  SALESMEN 

Date 

Caller's  Name 

Repeseuting 

Intc-iwie^ved  by 

Time 

Nature  of  Business 

. 

FIG.  27.      THIS  RECORD  CAN  BE  KEPT  BY  THE  OFFICE  BOY.      IT  IS 
SOMETIMES  IMPORTANT  TO  BE  ABLE  TO  REFER  TO  SUCH  A  RECORD 
AS  THIS.      ANY  IMPORTANT  MATTER  DISCUSSED  CAN  BE  NOTED  IN 
THE  LAST  COLUMN  BY  THE  EMPLOYEE  OF  THE  DEPART- 
MENT WITH   WHOM   THE  INTERVIEW   WAS   HELD. 


180 


PURCHASING  AND  STORING 


PURCHASING  DEPARTMENT 


181 


Cost  of  Issuing:  Orders.— The  conditions  surround- 
ing the  work,  and  the  nature  of  the  purchases,  vary 
so  greatly  that  for  comparative  purposes  little  value 
can  be  attached  to  the  actual  cost  of  each  order  is- 
sued; nevertheless,  a  purchasing  agent  should  have 
at  least  an  approximate  idea  of  the  cost.  If  the 
operating  expenses  of  a  department  can  be  reduced 
by  curtailing  the  number  of  orders,  it  will  pay  to  in- 
vestigate this  question  with  a  view  to  consolidating 
many  of  the  minor,  or  petty,  requisitions. 

Some  discussion  of  this  matter  has  appeared  re- 
cently in  the  technical  press.  Supply  houses  that 
have  been  in  the  habit  of  receiving  many  small  orders, 
ranging  in  value  from  fifty  cents  to  a  dollar,  liave  put 
forth  the  claim  that  it  is  costing  in  the  neighborhood 
of  a  dollar  to  issue  each  of  th(\se  orders,  and  that  it 
would  be  cheaper  for  the  house  to  telephone  for  the 
small  items  needed,  and  have  tliem  delivered  C.  0.  D. 
This  is  a  poor  argument.  It  is  not  worth  a  negative 
discussion,  for  its  fallacy  is  apparent. 

It  is  easy  enough  to  compute  with  a  fair  amount  of 
accuracy  the  average  cost  of  orders  issued,  by  assess- 
ing the  departmental  expense  equally  on  the  number 
issued,  but  one  department  may  average  ten  orders  a 
day,  while  another  may  average  in  the  neighborhood 
of  one  hundred.  In  value  of  goods  purchased,  how- 
ever, the  larger  quantity  may  not  equal  th(^  smaller 
quantity.  As  already  stated,  it  is  advisable  to  know 
something  of  this  question  of  value,  for  the  same 
reasons  that  any  executive  must  know  what  are  the 
expenses  of  running  a  business.  The  principal  point 
to  consider  is:    Will  a  reduction  in  departmental  ex- 


penses be  effected  by  reducing  the  number  of  orders, 
and  if  this  is  done,  will  there  be  any  reduction  in 
efficiency  ? 

Practical  Experience  for  Employees. — Many  of  the 
employees  in  purchasing  departments  are  lamentably 
ignorant  regarding  the  material  used  throughout  the 
establishment.  It  has  long  been  recognized  that  an 
essential  part  of  a  good  salesman's  training  is  a 
knowledge  of  what  he  is  selling.  Not  just  a  knowl- 
edge of  the  price  of  goods,  how  much  his  factory  has 
in  stock  or  can  make,  and  when  it  can  deliver,  but  a 
first-hand  knowledge  of  how  the  product  is  made,  its 
constituent  parts,  and  how  these  are  manipulated  and 
manufactured.  It  is  a  pleasure  for  purchasing  agents 
to  interview  salesmen  who  can  talk  about  their 
product  clearly,  concisely,  and  intelligently. 

It  is  just  as  essential  to  purchasing  efficiency  that 
all  the  employees  should  have  some  experience  in  the 
shop  or  the  stores,  or  in  both.  This  has  not  been 
considered  necessary  by  the  majority  of  concerns, 
and  the  result  is  that  it  takes  employees  years  to 
learn  the  distinction  between  various  materials  and 
tools.  Moreover,  they  are  continually  referring  ques- 
tions to  the  head  of  the  department  or  to  his  assist- 
ant which  they  should  be  in  a  position  to  answer  for 
themselves. 

By  way  of  example:  a  man  who  was  put  in  charge 
of  the  purchase-order  record  listed  twist  drills,  elec- 
tric drills,  and  radial  drills  all  under  one  heading, 
and  also  classed  together  machinists  hammers  and 
pneumatic  hammers.  This  man  was  exceptionally 
good  in  the  accounting  department,  from  which  he 


182 


PURCHASING  AND  STORING 


PURCHASING  DEPARTMENT 


183 


1 1 
ii 


was  taken,  but  when  put  on  work  that  required  at 
least  a  theoretical  knowledge  of  materials,  tools,  and 
supplies,  he  failed  entirely  as  far  as  keeping  intel- 
ligent purchase  records  was  concerned.  On  the  other 
hand,  there  are  firms  that  have  secured  excellent  re- 
sults by  selecting  the  employees  from  hardware  and 
machinists '-supply  houses,  or  by  first  giving  their  men 
some  experience  in  their  own  stores  or  in  the  super- 
intendent's office,  where  they  come  in  direct  contact 
with  the  goods  that  have  been  purchased. 

Ethical  Standards  and  Policy  of  the  Department- 
Graft  is  an  ugly  word.  It  is  a  raw  term.  Not  all 
that  is  meant  and  implied  by  the  expression,  how- 
ever, applies  to  existing  purchasing  departments — at 
least  not  to  the  purchasing  departments  of  business 
concerns — any  more  than  it  does  to  any  other  depart- 
ment of  a  business.  On  this  point  I  take  direct  issue, 
as  a  result  of  long  experience,  with  the  many  asser- 
tions to  the  contrary  which  are  made  by  disappointed 
salesmen,  and  which  not  infrequently  app<^ar  in  the 
public  press.  In  no  department  are  there  greater  op- 
portunity and  temptation  to  travel  off  the  straight 
and  narrow  path,  and  in  no  department  are  there 
more  insidious  elements  and  conditions  to  contend 
with,  than  in  the  purchasing  dc^partment.  That  form 
of  graft  which  consists  of  bribery  in  any  form  on  the 
part  of  any  member  of  the  department,  I  shall  not 
discuss.  The  practice  is  vicious  and  demoralizing; 
the  giver,  the  taker — in  fact,  any  person  involv(?d  in 
such  a  practice  or  having  a  knowledge  of  it — is  not 
unaware  of  this  fact.  To  deny  that  it  is  entirely  non- 
existent would  be  foolish.    There  are,  however,  many 


other  elemenfs  that  thread  their  way  through  the 
operation  of  the  purchasing  function,  which  have  per- 
haps a  much  greater  influence  on  the  proper  and 
efficient  exercise  of  it. 

Reciprocal  Agreements  in  Purchasing. — The  sales 
department  may  wish  to  encourage  and  cultivate  good 
relations  with  a  prospective  customer  or  a  present 
customer  who  may  be  able  to  furnish  certain  ma- 
terial being  purchased  by  the  concern.  Pressure  is 
brought  to  bear  on  the  purchasing  department  to 
favor  this  particular  customer  or  prospective  cus- 
tomer. If,  in  the  process,  anything  is  sacrificed  in 
the  way  of  price,  quality,  or  service,  then  efficient 
purchasing  has  gone  by  the  board.  There  is  no 
favoritism  in  true  purchasing.  Orders  are  not  given 
as  ^* favors,"  but  because  the  recipients  can  stand  up 
better  than  their  competitors  under  the  scrutiny  and 
searching  investigation  of  the  purchasing  department 
— because  they  have  been  found  worthy. 

The  real  buyer  holds  dear  certain  ideals  and  funda- 
mentals in  the  exercise  of  his  profession.  Why  should 
he  cast  these  aside  and  throw  them  overboard  to 
enable  any  other  department  to  make  a  profit  or  put 
through  a  deal?  Is  that  other  department  so  little 
sure  of  itself  that  it  cannot,  on  the  merit  of  its  goods 
or  its  proposition,  carry  on  its  own  transactions  with- 
out the  assistance  of  a  reciprocal  agreement  such  as 
has  been  outlined?  If  the  concern  which  it  is  pro- 
posed to  ** favor"  with  orders,  is  in  as  good  a  position 
as  any  other  concern — or  in  a  better  one — to  supply 
the  needs  of  the  establishment,  the  fact  would  have 
been  discovered  by  any  live  purchasing  agent. 


I ', 


If 


yJ. 


184 


PURCHASING  AND  STORING 


PURCHASING  DEPARTMENT 


185 


It  is  altogether  possible  that  another  department 
may  bring  to  the  notice  of  the  purchasing  depart- 
ment, in  the  manner  indicated,  some  firm  or  corpora- 
tion which  is  eminently  well  litted  to  supply  part  of 
its  requirements;  but  if  this  is  possible,  there  has  been 
negligence  on  the  part  of  the  purchasing  department 
m  not  discovering  that  concern  itself.  If,  on  con- 
sideration of  all  the  factors  which  enter  into  right 
buying,  it  is  found  that  a  certain  firm  is  on  an 
equality  with  the  best,  then  by  all  means  let  it  have 
the  business;  but  if  it  is  not,  then  that  other  depart- 
ment should  be  notified  of  the  exact  conditions.  The 
purchasing  department  cannot  assume  responsibility 
for  buying  anything  on  a  reciprocal  agreement  which 
involves  a  departure  from  the  fundamental  principles 
of  good  buying.  Reciprocity  is  probably  the  cause  of 
more  evils  than  unadulterated  bribery. 

Executive  Pressure.— More  unpardonable  than  the 
pressure  exerted  to  bring  about  reciprocity,  is  the 
pressure  brought  to  bear  by  officials  and  executives 
upon  the  purchasing  department  to  make  that  depart- 
ment buy  from  some  concern  in  which  thoso  officials 
are  interested.  Perhaps  the  officials  are  stockhoklers, 
or  have  relatives  or  friends  who  are  interested  in  the 
firm  in  question.  Some  purchasing  agents  are  not 
prepared  to  part  with  their  positions,  and  will  there- 
fore give  way  to  this  pressure,  disregarding  the  es- 
sentials of  price  or  quality,  or  both. 

Possibly  an  official  may  issue  instructions  that  the 
purchasing  department  shall  buy  from  some  concern 
which  has  been  brought  to  his  notice  by  a  friend, 
simply  to  do  a  good  turn  for  his  friend,  and  with  no 


ulterior  motives  in  view.  This  kind  of  thing  is  often 
done  thoughtlessly  and  heedlessly,  but  the  instructions 
should  be  qualified,  to  safeguard  the  principles  of  pur- 
chasing, and  with  a  due  regard  for  the  interests  of 
the  official's  own  corporation.  If  the  instructions 
issued  to  the  purchasing  agent  are  not  qualified,  and 
would  seem  to  be  given  in  disregard  of  the  funda- 
mentals of  good  buying,  then  it  is  certainly  up  to  the 
purchasing  agent  to  make  a  report  to  the  proper 
quarter. 

In  instances  in  which  there  are  interlocking  in- 
terests, the  principles  of  buying  are  not  involved. 
If  any  difference  exists  in  the  matter  of  price  be- 
tween what  is  paid  and  what  could  be  obtained  in 
open  competition,  it  is  probably  adjusted  by  the 
ownership  which  is  held  in  the  selling  concern.  In 
such  cases  it  is  advisable  for  the  purchasing  agent  to 
refrain- from  asking  for  competitive  bids.  There  would 
be  no  prospect  of  their  acceptance  and  the  bidders 
would  quickly  '*get  wise  to"  the  situation.  To  pre- 
tend that  genuine  competition  exists  when  it  does  not, 
would  seriously  injure  a  purchasing  agent's  effective- 
ness. 

Friendship  in  Business.— Friendship  naturally  de- 
velops when  men  of  congenial  dispositions  are  brought 
together  in  business  life.  There  is  a  narrow  minded 
element  that  would  have  the  purchasing  agent  forego 
the  privilege  of  selecting  friends  from  among  the  men 
with  whom  he  comes  in  contact.  This  element  con- 
tends that  it  is  not  only  questionable,  but  unethical, 
for  a  buyer  to  dine  with  a  man  whose  commercial 
function  is  to  sell  goods.    There  are  also  some  pur- 


186 


PURCHASING  AJNl)  STORING 


t 


chasing  agents  who,  aware  of  this  attituch>,  impar- 
tially rebuff  all  salesmen,  whether  they  are  well-mean- 
ing or  not,  who  strive  to  broaden  a  business  acquaint- 
ance. 

Any  broad-minded  purchasing  agent  will  give 
friendship  as  readily  and  as  quickly  as  he  receives  it, 
and  if  he  does  this  to  develop  an  embryonic  friend- 
ship or  to  perpetuate  one  already  formed,  his  conduct 
is  right  and  may  lead  to  gn^at  good.  Many  true 
friendships  between  buyers  and  sellers  have  been 
formed.  But  if  the  purchasing  agent  takes  advantage 
of  his  office  to  receive  special  remuneration,  he  de- 
cidedly does  wrong. 

Friendship  is  a  matter  apart  from  money.    It  has 
been,  and  always  will  be,  an  important  factor  in  busi- 
ness transactions.    On  a  proper  plane  it  is  to  be  en- 
couraged betw(^en  buyer  and  seller,  for  it  can  be  of 
great  advantage  to  both  parties.     I  have  referred  to 
this   subject   in   previous   chapters,   and   I    have   ex- 
plained how  valuable  friendship  can  be  when  a  buyer 
is  suddenly  called  upon  to  purchase  something  new. 
To  confer  with  business  friends  at  such  times  is  the 
quickest  and  surest  way  to  find  the  best  market  and 
the  best  price.    When  it  is  difficult  for  a  buyer  to 
secure  an  article  wanted  quickly,  a  seller,  for  the  sake 
of  friendship,  will  undertake  to  supply  it,  and  will 
put  himself  to  much  inconvenience  to  do  so.    Friend- 
ship can  be  cultivated  even  through  the  very  manner 
in  which  a  salesman  is  told  he  has  lost,  or  cannot 
have,  an  order.     These  may  seem  small  things,  but 
courtesy,    square    dealing,    honesty,    and    straight- 
forwardness beget  friendship.    They  are  appreciated 


PURCHASING  DEPARTMENT 


187 


by  sellers,  and  the  buyer  benefits  very  largely  from 
them.  The  small  effort  expended  in  this  manner  will 
bring  returns  when  least  expected,  and  to  a  much 
greater  extent  than  could  be  anticipated  from  the 
effort  made.  Friendliness  is  a  natural  qualification 
of  some  buyers;  it  should  be  cultivated  by  others. 

There  are  ethics  of  selling,  as  well  as  ethics  of  buy- 
ing. Many  business  houses  have  adopted  and  main- 
tained a  certain  standard  of  conduct  in  their  relations 
with  other  firms,  and  have  built  up  and  firmly  estab- 
lished a  reputation  for  themselves  on  this  standard. 
There  should  not  be  mutual  suspicion  and  distrust 
between  such  concerns  and  buyers  who  measure  their 
motives  by  the  highest  standards  of  honor  and  con- 
duct governing  their  motives,  for  the  principles  of 
both  parties  are  identical. 

Eflfects  on  Whole  Depaxtment.— The  maintenance  of 
a  standard  in  purchasing  is  not  the  particular  privi- 
lege of  one  man.  Any  attempt  to  pervert  these 
standards  is  usually  attributed  to  a  desire  on  the 
seller's  part  to  secure  an  order  at  a  higher  price  than 
is  justified,  but  this  is  very  rarely  the  case.  Inflated 
prices  are  very  easy  to  detect,  and  returns  are  not 
commensurate  with  the  risks  incurred.  Degrading 
quality  is  a  simpler  and  easier  method.  Such 
procedure  involves  the  persons  in  charge  of  inspec- 
tion, or  the  receiving  clerk.  If  inspectors  are  sent  to 
the  seller's  plant  to  examine  and  inspect  material  be- 
fore shipment,  they  must  be  men  of  proved  character 
and  dependability. 

It  is  futile  to  contend  that  the  extension  of  scientific 
methods  eliminates  all  forms  of  dishonesty.    It  does 


188 


PURCHASING  AND  STORING 


help,  materially  perhaps,  through  the  safeguards 
erected.  But  independently  of  this,  buying,  as  a  com- 
mercial pursuit,  stands  on  a  higher  plane  to-day  than 
it  did  even  only  a  few  years  ago.  This  development 
will  undoubtedly  continue.  Many  of  the  liltle  tricks, 
misrepresentations,  evasions  of  contract  ol)ligations, 
withdrawal  of  accepted  quotations,  divulgence  of  a 
bidder's  price  to  a  competitor,  and  innumera))le  other 
similar  expedients,  are  fast  disappearing  from  both 
the  buyer's  and  the  seller's  methods.  Their  relations 
are  being  established  on  a  better  basis— a  basis  which, 
according  to  present-day  standards,  should  be  desig- 
nated a  businesslike  basis. 

A  few  other  points  in  connection  with  the  policy  of 
the  purchasing  department  are  so  well  expressed  in 
the  following  quotation  that  I  include  it  here.  The 
extract  is  from  a  speech  entitled  **The  Cultivation  of 
a  Higher  Code  of  Business  Practice  and  of  Business 
Ethics,"  delivered  at  the  twentieth  annual  convention 
of  the  National  Association  of  Credit  Men. 

Am  I  not  safe  in  saying  that  we  have  no  greater  and  no 
more  urgen»t  task  than  this?  The  unbusinesslike  i)ractiee  of 
allowing  bills  to  run  after  maturity,  the  exaction  of  unjust 
claims  and  allowances,  the  rejection  of  goods  shipped  on  bona 
fide  orders,  the  deduction  of  discounts  after  the  discount  pe- 
riod has  expired — are  not  these  abuses  the  bane  of  every  cr(?dit 
department?  And  why?  Because  there  has  grown  up  in  our 
land  too  light  a  regard  for  the  binding  obligation  of  a  con- 
tract. An  importunate  desire  for  immediate  gain  has  usuj-ped 
the  place  of  honor.  We  need  to  assert  that  the  placing  of  a 
bona  fide  order  confers  a  property  j-ight  that  cannot  be  re- 
scinded except  at  the  option  of  the  vinidor ;  that  after  a  ship- 
ment has  been  received  and  accepted,  the  shipper  is  justly 
entitled  to  payment  in  full,  according  to  the  contract,  witliont 


PURCHASING  DEPARTMENT 


189 


unjust  deduction ;  that  time  is  of  the  essence  of  the  contract 
—therefore,  the  bill  should  be  paid  promptly  at  maturity; 
and  that  the  taking  of  a  discount,  except  within  the  discount 
period,  reflects  upon  the  honor  of  the  man  or  firm  deducting 
it.  Too  long  have  we  acquiesced  in  these  evils.  Perhaps  we 
are  m  part  responsible  for  their  existence.  It  now  devolves 
upon  us  to  put  them  without  the  pale,  as  unbusinesslike,  un- 
ethical, and  unwarranted  in  practice  or  in  morals. 

Outline  of  Work.— In  preceding  chapters  I  have 
dealt  with  many  phases  of  the  work  of  a  purchas- 
ing department.  Before  discussing  the  organization 
necessary  to  carry  out  this  work,  I  wish  to  give  the 
following  detailed  survey  of  that  work  and  a  resume 
of  what  it  embraces: 


1. 


2. 


3. 


The  purchasing  procedure.  That  is,  the  receipt  of 
the  requisition;  its  proper  examination;  the 
various  checks  to  which  it  is  subjected;  establish- 
ing a  price  for  the  material  requisitioned,  either 
from  contracts  or  by  obtaining  new  quotations— 
this  step  involves  comparison  of  the  bids  received; 
negotiations  with  the  successful  bidder;  arranging 
all  the  terms  of  contract;  and  finally,  closing  the 
deal  and  placing  the  order. 

Getting  delivery  of  the  order.  Following  up  the 
vendors;  arranging  for  inspection,  as  stipulated, 
either  at  vendor's  factory  or  at  destination;  pos^ 
sibly  arranging  for  transportation  and  tracing 
while  in  transit. 

Receiving  the  invoices ;  submitting  them  to  proper 
checks,  to  make  sure  that  they  are  strictly  ac^ 
curate  in  every  way,  and  that  they  represent 
exactly  the  price,  terms,  and  quantities  stated  on 
the  order;  finally,  approving  them  for  payment. 


I 


190  PURCHASING  AND  STORING 

4.  The  collection  of  information  necessary  and  use- 
ful to  the  department.  This  information  must  be 
tabulated  and  recorded  in  such  a  manner  as  to  be 
available  for  instant  use.  Practically  every  mem- 
ber of  the  department  should  have  access  to  such 
data.  One  of  the  principal  things  to  keep  in 
mind  is  the  necessity  for  clearness  and  lucidity. 
This  accumulation  of  information  includes  cata- 
logues and  all  literature  considered  essential  for 
the  department.  Some  forms  for  recording  this 
information  have  been  given  in  earlier  chapters, 
and  others  will  follow  in  the  discussion  of  the  re- 
spective subjects. 

These,  in  brief,  are  the  operations  the  purchasing 
department  covers.  In  later  chapters  on  routine  work 
they  will  be  closely  followed,  step  by  step,  and  each 
detail  will  be  explained.  The  above  summary  is  in- 
tended as  an  outline  that  may  render  the  more  in- 
telligible the  discussion  of  the  organization  of  the  de- 
partment, which  follows. 

Organization.— The  size  of  the  department  will,  of 
course,  conform  to  the  needs  of  the  establishment.  It  is 
impossible  to  lay  down  any  set  rules  in  regard  to  this 
point.  I  have  been  frequently  questioned  concerning 
the  requisite  number  of  employees,  and  in  such  in- 
stances the  information  on  which  I  was  expected  to 
base  an  opinion  was  the  number  of  men  employed  in 
a  factory,  the  capital  of  a  corporation,  and  other 
features  which  have  only  a  very  indirect  bearing  on 
this  point.  The  number  of  employees  is  determined 
by  the  amount  of  work,  and  the  calibre  of  the  em- 


PURCHASING  DEPARTMENT 


191 


ployees  by  the  importance  of  the  purchases.  It  is  im- 
possible to  decide  a  question  of  this  character  with- 
out first  making  a  close  examination  and  scrutiny 
of  the  work.  Conditions  vary  in  every  concern,  and 
individual  necessities  determine  in  every  case. 

Establishments  that  are  concentrated  in  a  group  of 
buildings,  with  the  stores  in  close  proximity,  can 
handle  the  purchases  with  less  help  than  those  that 
have  several  factories,  scattered  over  a  wide  area. 
Requisitions  for  an  amazing  variety  of  materials  pass 
through  some  purchasing  departments,  making  the 
amount  of  detail  work  far  greater  than  it  is  in  those 
departments  that  buy  a  limited  variety.  Then  again, 
it  is  possible,  with  some  materials,  to  place  long-time 
contracts;  in  cases  of  this  kind  the  work  is  con- 
siderably lessened,  as  it  is  not  necessary,  under  such 
circumstances,  to  canvass  the  market  so  often.  All 
these  features  and  many  others  determine  the  number 
of  employees  requisite  to  carry  on  the  work  efficiently. 

Irrespective  of  the  volume,  there  is  a  well-defined 
course  through  which  the  work  must  pass.  I  propose 
to  outline  this  course.  In  accommodating  it  to  indi- 
vidual conditions,  it  may  be  found  necessary  in  small 
departments  to  amalgamate  some  phases  of  the  work, 
while  in  large  departments  the  handling  of  what  is 
called  a  **one  man's  job''  may  require  several  men. 

Figure  28  illustrates  in  a  diagrammatic  manner  the 
organization  of  a  purchasing  department.  The  duties 
of  each  member  are  briefly  outlined  in  the  following 
description. 

The  Purchasing  Agent.— This  man  will  have  the 
general  management  and  supervision  of  the  depart- 


192 


PURCHASING  AND  STORING 


1: 


^ 

PURCHASING 
AGENT 

1 

CHIEF 
CLERK 

INVOICE 
CLERK 

REQUISITION 
CLERK 

1 

1 

TRAFFIC 
CLERK 

PRICE 
CLERK 

1 

1 

FOLLOW-UP 
CLERK 

, 

ORDER 
CLERK 

• 

1 

1 

STENO- 
GRAPHERS 

FILING 
CLERK 

INFORMATIOrl 
CLERK     1 

PURCHASING  DEPARTMENT 


193 


PIG.   28.      ORGANIZATION  DIAGRAM   OF   PURCHASING  DEPARTMENT. 

SEE  TEXT  FOR  EXPLANATION. 

ment  and  will  direct  its  policies.  He  will  consult- 
whenever  occasion  requires— with  other  department 
heads,  such  as  those  in  charge  of  the  production  de- 
partment, sales  department,  accounting  department, 
and  financial  department.  Except  for  some  minor 
details,  he  should  settle  all  differences  concerning 
relations  with,  and  connection  between,  his  depart- 
ment and  another.  He  will  personally  conduct  nego- 
tiations, and  will  close  all  large  and  important  con- 
tracts. If  these  are  vital  to  production  work,  he 
will  oversee  the  progress  being  made  by  sellers,  and 
probably  will  arrange  for  inspection  or  tests  to  be 
made.    He  will  have  to  interview  many  callers;  he 


will  have  to  adjust  any  serious  differences  that  may 
arise  with  vendors.  He  will  indicate  to  his  assist- 
ant or  chief  clerk*  the  sellers  who  he  believes  should 
bid  on  certain  materials.  He  will  have  to  keep  him- 
self posted  on  prices  of  commodities,  on  financial 
problems,  on  all  business  features  which  could  affect 
the  purchasing  function — in  short,  on  business  condi- 
tions generally.  He  will  be  the  inspiration  of  his  de- 
partment, and  its  responsible  head.  When  the  pur- 
chasing has  to  be  done  for  several  factories  or 
branches,  and  local  buying  is  necessary,  the  depart- 
ment head  might  take  the  title  of  General  Purchasing 
Agent.  He  would  then  have  an  assistant,  who  would 
assume  a  portion  of  his  work,  subject  to  his  general 
direction.  In  the  absence  of  the  General  Purchasing 
Agent,  his  assistant  would  be  supreme. 

Assistant  Purchasing  Agent,  or  Chief  Clerk. — In 
some  purchasing  departments,  it  may  be  advisable  to 
have  both  an  assistant  purchasing  agent  and  a  chief 
clerk.  In  such  a  case  the  chief  clerk  will  take  con- 
trol of,  and  be  responsible  for,  the  clerical  work  of 
the  department,  while  the  assistant  purchasing  agent 
will  be  his  superior  and  will  assume  some  of  the 
duties  of  the  purchasing  agent.  Whichever  title  is 
held  by  the  man  next  to  the  purchasing  agent,  he 
must  take  as  much  detail  work  off  the  head  of  the 
department  as  practicable,  in  order  that  his  superior 
may  have  as  much  time  as  possible  for  consultation 
and  for  the  larger  affairs  of  the  department.  He 
will  have  to  interview  some  pf  the  salesmen,  and 
he  should  also,  if  possible,  see  all  requisitions  as 
they  arrive  in  the  department,  and  then  turn  them 


)■i^ 


194 


PURCHASING  AND  STORING 


I 


over  to  the  requisition  clerk.  He  should  see  all 
correspondence  intended  for  the  purchasing  agent;  he 
will  handle  part  of  the  correspondence  relating  to 
bids,  designating  the  firms  from  which  quotations  are 
to  be  requested.  He  will  be  responsible  for  the  dis- 
cipline of  the  department,  administer  the  policies  of 
the  purchasing  agent,  and  generally  direct  the  routine 
work. 

Requisition  Clerk.— All  requisitions  should  go  to 
the  requisition  clerk  to  be  checked  for  autlientifiea- 
tion.  The  specification  should  also  be  checked.  It 
may  be  possible  to  arrange  foi-  this  man  to  keep  the 
purchase-order  record,  as  explained  in  Chapter  11. 
He  should  see  that  quantities  are  properly  stated,  and 
also  the  point  and  time  of  delivery,  and  so  on.  In 
brief,  he  should  see  that  the  requisitions  are  in  cor- 
rect shape  to  be  dealt  with  for  price-getting  and 
ordering. 

Price  Clerk.— The  requisition  will  pass  to  the  price 
clerk  from  the  requisition  clerk.  He  may  keep  the 
records  of  prices,  both  current  quotations  and  those 
prices  established  by  existing  contracts.  If  there  is  a 
price  established  by  contract,  he  will  insert  it  on  the 
requisition  and  pass  it  along  for  the  order  to  be  writ- 
ten up.  He  should  see  that  requests  for  quotations 
are  properly  written  up,  and  should  keep  a  record  of 
the  best  sources  of  supply,  if  there  is  no  gem^ral  infor- 
mation clerk  for  this  work. 

Order  Clerk.— The  order  clerk  should  receive  the 
requisition  after  all  questions  regarding  specifications, 
price  and  delivery  are  settled;  then  he  should  write 
up  the  order.    He  will  be  responsible  for  thci  proper 


PURCHASING  DEPARTMENT 


195 


wording  of  the  orders  and  for  checking  them,  as  well 
as  for  the  distribution  of  the  copies  to  interested 
parties  or  departments. 

Follow-up  Clerk. — The  follow-up  clerk  will  be  re- 
sponsible for  following  up  and  getting  delivery  as 
specified  on  the  order,  and  will  report  at  once  to  the 
chief  clerk  when  he  is  unable  to  get  satisfactory  as- 
surances, or  when  delays  of  any  kind  occur.  He  will 
have  to  turn  over  to  the  traffic  clerk  all  details  of 
orders  which  he  will  be  required  to  trace.  He  must 
also  advise  the  various  departments  regarding 
promises  of  shipments,  and  must  promptly  notify 
them  of  any  delays. 

TraflSc  Clerk. — This  man  will  be  responsible  for 
tracing  all  shipments  while  in  transit.  He  must  be 
posted  on  freight  rates  and  classifications,  and  must 
give  information  to  the  chief  clerk,  whenever  neces- 
sary, regarding  best  routes  between  shipping  point 
and  destination  and  probable  time  required  for  trans- 
portation. He  will  be  required  to  check  all  freight 
and  express  bills,  as  well  as  all  freight  allowances  or 
charges  on  invoices.  Finally,  he  should  adjust  all 
claims  against  transportation  companies. 

Invoice  Clerk. — The  invoice  clerk  will  receive  and 
be  responsible  for  all  invoices.  He  must  get  them 
approved  before  the  discount  date  expires,  and  must 
check  them  from  every  angle  to  see  that  they  con- 
form to  the  order  in  every  way.  Quantity,  price,  and 
delivery,  must  be  verified.  Prevention  of  duplication 
must  be  certain  and  positive.  He  must  take  up  with 
sellers  all  discrepancies — with  the  understanding  that 
any  decisions  of  his  are  subject  to  the  approval  of  the 


)i 


196 


PURCHASING  AND  STORING 


chief  clerk — obtain  credits  for  these,  and  generally  ad- 
just all  differences.  Finally,  he  must  keep  close  track 
of  all  invoices,  to  insure  their  approval  in  tini<^  for  the 
financial  department  to  pay  them  on  the  date  that  was 
agreed  upon. 

Information  Clerk.— The  information  clerk  will 
have  charge  of  catalogues,  and  should  properly  index 
and  classify  them.  He  should  keep  all  rtn-ords  as 
directed  by  the  chief  clerk,  and  should  see  that  they 
are  always  where  they  may  be  referred  to  by  any 
member  of  the  department.  He  should  be  able  to 
quote  market  prices  and  recent  [)rices  to  othc^r  depart- 
ments and  to  give  them  information  concerning  avail- 
able suppliers.  When  any  new  material,  or  a  special 
tool,  is  wanted,  he  should  be  able  to  state  or  ascertain 
quickly  where  it  can  be  procured. 

General  Arrangement  of  Department.— There  are 
many  minor  activities  connected  with  stenographic 
work,  receiving  callers,  mailing,  and  so  on,  which  are 
common  to  every  business  office  and  which  I  shall  not 
discuss  in  detail.  In  the  diagram  of  a  department, 
shown  in  Figure  28,  no  provision  is  made  for  inspec- 
tion. When  this  part  of  the  work  comes  under  the 
jurisdiction  of  the  purchasing  department,  it  will  be 
taken  care  of  by  the  purchasing  agent  or  the  cliief 
clerk,  provided  the  inspection  is  carried  on  at  seller's 
warehouse  or  factory;  in  these  cases  the  orders  are 
probably  of  sufficient  importance  for  one  of  these  per- 
sons to  supervise  delivery.  If  the  inspection  is  done 
at  the  factory,  it  may  be  independent  of  the  f)urchas- 
ing  department.    I  shall  state  instances  of  tlds  kind 


PURCHASING  DEPARTMENT 


197 


later,  in  connection  with  the  work  of  the  storeskeep- 
ing  department. 

The  organization  of  the  personnel  of  a  purchasing 
department  is  bound  to  vary  with  circumstances  and 
conditions.  The  work  may  in  some  instances  be 
found  to  be  much  heavier  in  some  sections  than  in 
others;  if  so,  a  rearrangement  to  meet  this  condition 
can  be  easily  provided  for.  Where  a  large  number  of 
purchases  are  made,  it  may  take  as  many  clerks  to 
check  and  handle  the  invoices  as  it  does  to  check 
requisitions,  price  them,  obtain  quotations,  and  place 
orders.  In  many  purchasing  departments  each  sec- 
tion keeps  such  records  as  it  requires  for  its  particu- 
lar work.  Generally  speaking,  however,  this  practice 
is  not  to  be  commended,  since  it  usually  means  dupli- 
cation of  work;  a  common  information  bureau,  if 
properly  arranged  and  easy  of  access,  is  the  preferable 
method. 

The  w^ork  of  any  purchasing  department  must  be 
organized  on  some  comprehensive  scheme;  moreover, 
the  work  itself  must  follow  a  route  that  is  arranged  in 
logical  sequence,  in  order  that  it  may  not  by  any 
chance  undergo  duplication  or  backwardation.  The 
aim  should  be  to  plan  a  route  for  the  work  with  a 
definite  object  in  view,  coherent  and  thorough.  Over- 
systematizing  must  be  avoided;  if  it  is  indulged  in,  it 
will  lead  to  confusion  and  will  be  a  menace  to  effi- 
ciency. On  the  other  hand,  an  incomplete  system  will 
render  the  work  laborious.  The  justification  of  a 
good  system  and  good  methods  is  their  effectiveness 

• 

m  covering  with  accuracy  and  despatch  all  the  points 
comprehended  in  the  work  of  the  office.    It  will  main- 


ii  'ft 


It 


198 


PURCHASING  AND  STORING 


tain  order,  regularity,  and  expedition.  A  good 
system  is  dictated  bv  common  sense.  It  has  to  be  ad- 
ministered  by  the  organized  office  staff  which  has  all 
the  human  frailities  to  contend  with.  The  better  co- 
ordination it  can  bring  to  their  efforts,  the  greater  its 
potentialties  for  success. 


{ 


fil 


CHAPTER  X 
THE  PURCHASING  LIBRARY 

Books. — The  number  of  books  a  man  possesses  on 
any  subject  is  largely  the  measure  of  his  interest  in 
that  subject.  The  existing  literature  on  purchasing 
is  exceedingly  limited,  but  nevertheless  the  student 
of  that  subject  has  a  very  wide  field  from  which  to 
select  his  reading.  There  is  scarcely  any  book  pub- 
lished on  any  business  subject  from  which  he  cannot 
glean  something  which  will  broaden  his  knowledge 
and  add  to  his  value  to  his  profession  and  to  his 
concern.  For  this  reason,  it  is  expected  that  a  pur- 
chasing agent  who  is  truly  interested  in  his  work 
will  own  many  books  on  business  methods  and  prac- 
tices.* 

The  day  has  passed  when  any  business  man  can 
learn  by  experience  only.  Would  a  doctor,  a  lawyer, 
an  engineer,  a  midshipman,  an  army  cadet,  or  would 
any  advertising  man,  salesman,  or  accountant  think 
of  reaching  the  highest  niches  in  their  respective 
professions  through  experience  alone?  It  is  possible 
today  to  save  oneself  many  hard  knocks  by  taking 
advantage  of  the  experience  of  other  business  men 
as  recorded  in  their  reliable  data. 

The  output  of  business  books  has  been  on  the  in- 
crease during  the  last  few  years,  and  the  publishing 

199 


Ml 


I     i! 


I 


200 


PURCHASING  AND  STORING 


houses  that  have  issued  these  books  have  made  a 
definite  contribution  to  the  business  world.  Like- 
wise, the  libraries  that  have  recognized  their  op- 
portunity to  render  a  specialized  service  to  business 
men,  have  added  much  to  the  general  betterment  of 
business. 

Books  dealing  in  a  methodical,  cut-and-dried  man- 
ner with  any  business  subject  are  not  the  only  jjooks 
that  the  purchasing  agent  will  find  it  worth  his 
while  to  study.  It  is  becoming  more  and  more  evi- 
dent that  the  very  best  tonic  for  the  business  man 
is  the  reading  of  inspirational  books.  Those  which 
set  standards  and  ideals,  which  command  our  respect 
are  always  worthy  of  a  place  in  the  library. 

It  is  impossible  to  name  any  particular  book,  or  to 
give  any  list  of  them,  suitai)le  for  the  students  of 
purchasing.  Selections  can  be  made  from  the 
catalogues  of  publishers  of  technical  and  business 
books,  and  good  reading  can  always  be  found  in  any 
public  library.  A  book  which  is  an  excellent  guide 
to  reading,  and  which  should  prove  valuable  to  any 
person  who  wishes  to  get  a  comprehensive  list  of 
business  books,  is  **  Sixteen  Hundred  Business 
Books."  It  was  compiled  by  Sarah  B.  Ball,  of  the 
Newark,  N.  J.,  Public  Librarv  and  is  published  by 
H.  W.  Wilson  Co.  of  White  Plains,  N.  Y. 

Periodicals.—Foremost  among  periodicals  suitable 
for  the  purchasing  library  is  *'The  Purchasing 
Agent."  It  is  ably  conducted,  and  alwavs  has  some 
information  of  value  to  those  engaged  in  purchasing. 
It  may  well  be  given  a  place  in  every  i)urchasing 
agent's  library. 


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201 


For  those  buyers  who  must  be  posted  on  the  daily 
fluctuations  in  the  prices  of  metals  with  information 
concerning  output,  movements,  and  available  stocks, 
as  well  as  in  regard  to  estimates  of  production,  there 
is  **The  American  Metal  Market." 

**The  New  York  Journal  of  Commerce"  is  exceed- 
ingly valuable  for  the  student  of  general  business 
conditions,  commodity  prices,  and  commercial  mat- 
ters of  interest.  **The  Annalist,"  a  weekly  publica- 
tion, is  an  excellent  medium  for  those  who  want  the 
technical  and  business  information  without  the  gen- 
eral news  items. 

Those  interested  in  foreign  trade  conditions  should 
have  **The  Americas,"  published  gratis  by  the  Na- 
tional City  Bank  of  New  York.  There  are  several 
publications  which  make  a  specialty  of  industrial 
management,  and  also  many  devoted  to  particular 
industries,  such  as  hardware,  textiles,  w^oodworking, 
paper,  cordage,  coal,  and  so  on. 

Not  only  are  all  these  periodicals  valuable  for  in- 
formation concerning  prices,  commodity  movements, 
and  general  business,  but  their  advertising  columns 
are  worthy  of  scrutiny,  for  it  is  through  these  that  it 
IS  often  possible  to  enlarge  one's  market  and  field  of 
operations  in  buying. 

Registers  and  Agencies.— It  is  almost  impossible 
lor  a  purchasing  department  buying  a  large  variety 
of  articles  to  get  along  successfully  without  one  of 
«ie  well-known  registers,  such  as  Hendrick's  or 
Thomas's.  These  are  compiled  with  great  care  and 
are  very  comprehensive,  but,  as  explained  in  Chap- 
ter II  it  may  be  necessary  to  take  the  lists  given 


202 


PURCHASING  AND  STORING 


them  and  further  subdivide  these,  segregating  the 
firms  that  are  best  fitted  to  supply  one's  special  re- 
quirements. 

In  order  that  it  may  be  possible  to  determine  the 
financial  standing  of  concerns  with  whom  business 
relations  are  contemplated,  the  library  should  include 
either  Dun^s  or  Bradstreet's  reference  books,  or  per- 
haps those  of  such  agencies  as  Proudfoot's  and 
Moody's.  Through  these,  practically  any  informa- 
tion deemed  necessary  can  be  obtained,  including 
names  of  members  of  firms,  ofiicers  of  companies,  and 
so  on,  and  special  reports  of  all  kinds. 

There  are  other  sources  from  which  much  infor- 
mation can  be  collated  by  the  purchasing  agent. 
Many  trades  have  an  agency  that  disseminates  news 
for  its  particular  field.  Babson's  Statistical  Organ- 
ization, for  example,  issues  to  subscribers  exception- 
ally good  information  based  on  scientifically  col- 
lected facts  and  data. 

Catalogues. — Every  well-ordered  purchasing  de- 
partment contains  a  comprehensive  equipment  of 
catalogues.  Not  only  those  which  are  pertinent  to 
regular  purchases  should  be  kept,  but  also  those 
covering  goods  in  which  it  is  likely  that  one  may  be 
interested  at  any  future  time.  It  is  also  advisable  to 
have  catalogues  of  manufacturers  who  make  compo- 
nent parts  of  some  article  or  machine.  For  example, 
one  may  not  buy  cut  gears,  but  if  one  is  buying  some 
machinery  or  article  of  which  cut  gears  are  a  part, 
then  a  gear  catalogue  is  valuable  for  the  information 
it  gives. 

It  is  impossible  even  to   estimate  the  amount  of 


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203 


money  spent  annually  on  catalogues,  but  the  total 
must  be  stupendous.  The  wastage,  of  course,  is 
enormous,  but  to  set  against  those  catalogues  which 
are  lost  forever  are  those  which  work  overtime. 
Taking  it  all  in  all,  the  expense  must  be  justifiable 
or  the  custom  would  have  been  discontinued  or 
shown  a  tendency  to  die  out,  whereas,  as  a  matter  of 
fact,  it  is  undoubtedly  increasing. 

There  are  many  concerns  that  get  a  large  propor- 
tion of  their  business  through  catalogues.  The  great 
mail-order  houses  sell  their  entire  line  through  this 
medium.  On  the  other  hand,  some  products  could 
perhaps  never  be  sold  without  personal  explanation 
and  solicitation.  A  catalogue  is  an  advance  agent — 
it  is  on  the  ground  to  give  preliminary  information, 
and  is  frequently  the  precursor  of  an  active  order. 

To  the  purchasing  department,  catalogues  are  of 
great  value.  Other  departments,  also,  find  frequent 
use  for  them.  The  estimating  department  may  want 
to  look  up  some  valve  which  is  specified  by  a  pros- 
pective customer;  the  shop  engineer  may  wish  to 
know  the  foundation  plan  of  a  boring  mill;  the  draft- 
ing room  may  require  to  know  the  channel  sections 
rolled  at  a  certain  mill.  Questions  are  constantly 
being  asked  the  purchasing  department  regarding 
sizes  and  styles  of  very  many  articles,  and  it  must 
be  prepared  to  answer  fully  and  accurately. 

The  purchasing  department  should  have  complete 
charge  of  all  catalogues  for  the  whole  establishment. 
It  acts  as  a  clearing  house  for  information  needed 
by  other  depastments,  and  in  order  that  it  may  meet 
the  demands  made  on  it,  a  complete  installation  must 


u}| 


lii 


204 


PURCHASING  AND  STORING 


f 


be  maintained,  and  kept  in  such  shape  as  to  be  avail- 
able for  quick  reference. 

Technical  Information  in  Catalogues.— The  value 
of  technical  information  in  some  catalogues  is  not 
always  fully  appreciated.  It  must  be  remembered 
that  this  information  is  written  by  highly  trained 
practical  men,  experts  in  their  particular  line.  Gen- 
erally it  is  compiled  by  men  who  love  their  work,  and 
whose  ideals  are  the  perfection  of  their  product. 
Primarily,  of  course,  a  catalogue  is  an  advertising 
medium,  and  advertisements  cannot  always  be  taken 
at  their  face  value,  but  if  the  advertising  manager 
uses  the  knowledge  and  services  of  trained  technical 
experts  and  inserts  it  in  a  catalogue,  without  altera- 
tion, the  value  of  the  inforniation  is  not  lessened. 
The  matter  contained  in  catalogues  forms  a  liberal 
education  for  any  persons  engaged  in  ])urchasing 
work.  The  modern  tendency  in  catalogues  is  exact- 
ness in  the  claims  made,  so  that  specific  statements 
can  usually  be  relied  upon.  As  regards  general 
statements,  they  are  sometimes  apt  to  be  rated  above 
par. 

By  way  of  illustration  I  shall  take,  at  random,  a 
catalogue  of  leather  belting.  It  contains  an  exhaus- 
tive treatise  on  hides.  Their  physical  characteristics 
are  explained,  the  difference  in  the  texture  of  hides 
from  different  breeds  of  cattle  is  pointed  out,  and  it 
is  shown  how  these  need  a  variety  of  car(^  in  treat- 
ment during  the  tanning  process  if  a  sufficient  de- 
gree of  uniformity  is  to  be  obtained.  Th(»  progress 
of  the  hides  through  the  tannery  is  minutely  de- 
tailed.   Illustrations  of  hides  are  given,  showing  in 


THE  PURCHASING  LIBRARY 


205 


Avhat  manner  they  are  cut  and  trimmed,  and  for 
what  purposes  the  backs,  shoulders,  centers,  and 
sides  are  used  and  how  they  are  graded.  Next,  there 
is  a  disquisition  on  the  effects  of  acids,  oils,  water, 
and  so  on,  on  leather;  an  explanation  of  how  belting 
is  manufactured;  how  to  order  belting;  how  to  figure 
horsepower  transmitted;  how  to  fasten  belting;  how 
to  figure  speed  of  pulleys — in  fact,  every  conceivable 
mechanical  condition  is  explained,  and  rules  are  given 
in  connection  wifli  them.  All  types  of  belt  drives 
are  illustrated,  and  the  necessary  data  are  given 
with  which  to  figure  them  correctly. 

A  catalogue  of  drop  forgings  gives  a  history  of 
the  art,  what  the  process  is,  how  dies  are  made,  the 
effect  of  heat  treatment  on  metals,  what  carbonizing 
is  and  why  it  is  done.  An  explanation  of  case 
hardening  follows,  with  suggestions  as  to  its  em- 
ployment for  certain  purposes.  Micro-photos  are 
shown,  illustrating  structural  differences  developed  in 
steel  by  varying  its  treatment. 

There  are  many  catalogues  of  tool-steel  manufac- 
turers, which  give  much  valuable  information  regard- 
ing steel  processes.  Beginning  with  the  iron  ore,  the 
description  makes  clear  in  what  manner  oxygen  is 
separated  from  the  iron,  and  deals  in  detail,  step  by 
step,  with  the  various  treatments  to  which  the  metal 
is  subjected  until  high-grade  steels  are  pro- 
duced by  the  introduction  of  different  percentages  of 
manganese,  nickel,  chromium,  tungsten,  vanadium, 
and  so  on.  Then  follow  details  regarding  forging, 
hardening,  tempering,  and  annealing. 

Manufacturers  of  insjalated  wires  and  cables  give 


...•jt 


•M 


20G 


PURCHASING  AND  STORING 


the  dielectric  strength  of  different  forms  of  insula 
tion;  the  properties  of  resistance  wires;  a  fund  of 
information  on  electrical  matters;  tables  of  sectional 
areas;  comparisons  of  wire  gauges;  and  ma  ay  othei 
features  which  at  some  time  are  essentially  involved 
in  purchasing  work. 

I  could  continue  these  illustrations  indefinitely,  but 
I  have  already  given  enough  to  show  the  gr(iat  value 
of  catalogues  in  the  education  of  the  purchasing  de- 
partment. Quite  often  the  technical  staff,  also,  de- 
pends upon  them  for  information.  A  well-selected 
list  of  catalogues,  properly  arranged  for  reference 
and  consultation,  is  therefore  a  necessary  and 
valuable  adjunct  to  any  purchasing  department,  from 
an  educational  point  of  view  alone. 

Standardization  of  Catalogues. — So  much  publicity 
has  been  given  recently  to  the  standardization  of 
catalogues,  and  there  has  been  so  much  discussion  in 
regard  to  the  subject,  that  a  tremendous  impetus  has 
been  given  to  the  movement.  Tangible  result?  must 
certainly  follow.  Since  the  matter  is  one  in  which 
all  persons  engaged  in  purchasing  have  a  large  in- 
terest, it  is  well  to  note  in  what  manner  the  change 
will  affect  them. 

The  present  catalogue  system  has  grown  up  with- 
out any  consideration  of  uniformity.  Each  manufac- 
turer has  apparently  looked  on  the  preparation  of  a 
catalogue  from  one  point  of  view  only — his  own. 
The  buyer's  interest  and  convenience  in  the  matter 
have  never  entered  into  his  calculations.  It  there- 
fore becomes  necessary  for  the  person  who  must  find 
accommodations  for  a  large  number  of  catalogues,  to 


THE  PURCHASING  LIBRARY 


207 


provide  for  an  endless  range  of  sizes.  This  require- 
ment, of  itself,  involves  the  loss  of  much  valuable 
filing  space.  Furnishing  catalogues  in  bound  books, 
each  book  containing  information  on  many  articles, 
also  compels  the  buyer  to  study  a  number  of  separate 
bound  volumes,  handling  countless  pages  relating  to 
other  material,  which  at  the  time  holds  no  interest  for 
him. 

The  high  cost  of  buying  and  the  high  cost  of  selling 
will  both  be  appreciably  lowered  by  the  change 
which  is  coming,  and  for  which  every  purchasing  de- 
partment should  be  prepared.  Today  many  thousands 
of  price  lists,  circulars,  and  data  sheets  received  by 
buyers  are  consigned  to  the  waste  paper  basket  be- 
cause the  buyers  have  no  method  of  properly  filing 
them,  or  because  owing  to  the  variation  in  the  size 
of  catalogue,  their  facilities  are  already  overcrowded. 

The  tendency  in  the  movement  for  standardiza- 
tion is  toward  the  issuance  of  all  catalogue  matter 
in  bulletin  form.  The  bulletins  will  include  every- 
thing pertaining  to  catalogues — price  lists,  illustra- 
tions, data  charts,  tables  of  sizes,  and  so  on.  All  the 
bulletins  will  be  of  uniform  size;  it  looks,  at  present, 
as  if  the  8^^  x  11  inch  size  would  finally  be  adopted. 
A  manufacturer  who  makes  several  articles  will  have 
a  bulletin  for  each  article.  This  bulletin  plan  has 
already  been  put  in  effect  by  some  manufacturers,  but 
without  any  agreement  among  themselves  as  to  a 
uniform  size,  and  in  many  cases  the  bulletins  are 
made  to  fit  special  binders — they  are  then  really  no 
better  than  the  ordinary  old-fashioned  catalogues. 

The  principal  advantages  to  the  purchasing  depan- 


I 


208 


PURCHASING  AND  STORING 


ment  of  the  new  scheme  of  standardization  are, 
briefly,  the  following:  All  bulletins  from  every 
manufacturer,  pertaining  to  an  article  or  a  material, 
will  be  filed  together,  and  whcm  it  is  necessary  to 
look  for  information  on  any  particular  artick^  or  ma- 
terial, it  will  be  found  located  in  one  place.  It  will 
not  be  necessary  to  make  a  search  through  many 
catalogues,  some  with  the  index  in  front,  others  with 
the  index  at  the  back;  some  with  prices  attached, 
others  with  separate  price  lists.  These  catalogues, 
under  the  present  system,  are  scattered  all  through 
the  tiles.  There  are  many  other  points  of  advantage 
to  the  buyer,  which  I  shall  not  enumerate  since  the 
scheme  is  not  yet  an  accomplished  fact;  it  will  cer- 
tainly be  adopted,  however,  and  every  purchasing 
department  should  be  posted  regarding  its  main 
features. 

Procuring  Catalogues.-^A  search  through  the  ad- 
vertisements in  the  trade  publications  coveiing  the 
manufactures  in  which  the  purchasing  department  is 
interested,  will  reveal  the  names  of  many  concerns  to 
which  applications  for  catalogues  may  b(^  made. 
Visiting  salesmen  will  speedily  arrange  to  have  their 
respective  houses  forward  catalogues,  many  of  which 
will  be  mailed  unsolicited.  Catalogues  are  a  distinct 
asset. 

The  extent  to  which  the  accumulation  of  catalogues 
should  be  carried,  must  be  decided  by  each  depart- 
ment for  itself.  It  sometimes  seems  to  me  that  no 
catalogue  which  is  issued  should  be  discarded.  In 
my  own  tirm,  calls  are  made  on  the  department  for 
a  tremendous  variety  of  articles,  because  of  the  wide- 


uii^V 


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209 


spread  and  varied  activities  of  this  company.  Un- 
doubtedly, however,  in  the  great  majority  of  in- 
stances there  is  a  limit  beyond  which  the  collecting  of 
catalogues  should  not  be  carried.  This  is  particu- 
larly true  in  industrial  establishments  that  manufac- 
ture a  single  line  of  articles  or  machinery.  In  such 
cases,  only  those  catalogues  that  describe  the  ma- 
terial or  equipment  for  which  there  is  immediate  or 
prospective  need,  should  be  accorded  a  place  in  the 
files  of  the  purchasing  department. 

Filing  Catalogues. — It  is  not  possible  to  do  very 
much  in  the  way  of  grouping  catalogues,  except  in 
the  matter  of  size,  and  in  this  respect  they  can  be 
segregated  into  five  or  six  groups.  These  dimen- 
sional groupings  can  be  readily  recognized  in  the 
index  from  the  key  letter  prefixed  to  the  number. 
For  instance,  B146  would  be  in  the  B  group,  and 
could  be  found  much  more  quickly  than  if  it  were  in 
numerical  sequence  irrespective  of  the  group  in  which 
it  rightly  belongs. 

The  grouping  together  of  all  catalogues  for  one 
class  of  material  has  the  advantage  of  enabling  a 
person  to  select  quickly  all  the  catalogues  on  one 
subject,  but  in  every  other  respect  such  a  scheme  is  a 
dismal  failure  and  cannot  be  recommended  for  use  in 
connection  with  any  ordinary  file.  Catalogue  filing, 
for  the  reasons  given,  is  loose,  ragged,  and  un- 
economical under  the  best  conditions,  so  far  as  space 
occupied  is  concerned,  but  in  keeping  all  catalogues 
on  one  subject  together  every  one  of  the  disadvan- 
tages is  greatly  aggravated. 

In  addition  to  the  catalogues  in  the  form  of  bound 


'•  < 


'Ml 


210 


PURCHASING  AND  STORING 


books,  in  every  purchasing  department  there  are 
almost  innumerable  pamphlets,  circulars,  price  lists, 
and  so  on,  which  it  is  necessary  to  keep  and  file. 
These  can  be  kept  in  cartons,  envelopes,  or  folders, 
of  uniform  size,  and  a  section  of  the  catalogue  filing 
case  can  be  devoted  to  receiving  them.  There  is  no 
difficulty  in  segregating  these  and  in  keeping 
pamphlets  pertaining  to  a  certain  material  in  one 
carton  or  folder. 

It  is,  of  course,  imperative  to  maintain  a  complete 
cross-index  under  the  name  both  of  the  supplier  and 
of  the  material,  as  shown  in  Figures  29  and  30.  It  is 
also  essential  to  have  a  record  of  those  catalogues  or 
documents  removed  from  the  file  and  taken  out  of 
the  department.  The  latter  procedure  can  be  taken 
care  of  by  inserting  cardboard  dummies  in  the  files 
in  the  place  of  removals.  On  these  dummies  a  record 
should  be  made  of  the  disposition  made  of  the 
originals.  A  record  can  also  be  kept  on  the  index 
card,  or  a  special  card  can  be  kept  upon  which  may 
be  entered  a  memorandum  of  all  documents  taken 
away  and  the  names  of  the  persons  to  whom  they  are 
delivered. 

Universal  Standard  Catalogue  System.— -E  M. 
Hooker,  formerly  President  of  the  Catalogue  Cabinet 
Company,  of  New  York,  who  has  operated  catalogue 
libraries  for  over  twenty  years,  has  devised  what  he 
terms  **The  Universal  Standard  Catalogue  System,'' 
and  is  publishing  indexes  to  the  catalogues  issued  by 
the  different  trades. 

These  indexes  assign  a  number  to  each  catalogue, 
so    that    the    user   may    have    a    completely    indexed 


Name  of 
Manufacturer 


Address 


Section 


iS 


No. 


146 


LIST  OF  MATERIAL  MANUFACTURED 


FIG.    29.      CARD    FOR    INDEXING    CATALOGUES    UNDER 
NAME  OF  MANUFACTURER 


MATFRIAI 

Manufacturer 

Address 

Section 

No. 

ill 


'•11 


FIG.   30.      CARD  FOR  INDEXING  CATALOGUES  UNDER 

NAME  OF  MATERIAL 
211 


212 


PURCHASING  AND  STORING 


ll'*< 


il 


library  of  catalogues,  if  he  will  number  them  and 
arrange  them  in  accordance  with  the  index.  The 
numbering  is  so  arranged  as  to  group  catalogues 
automatically  according  to  their  subjects.  The  in- 
dexes are  supported  by  the  advertisers,  and  are  free 
to  any  users  of  catalogues.  Labels  to  paste  on  the 
catalogue  may  be  procured  from  Mr.  Hooker.  These 
labels  give,  in  addition  to  the  number  of  the  cata- 
logue, a  description  of  it,  so  that  the  user  may  easily 
identify  the  catalogue  to  which  the  label  belongs. 
The  saving  in  labor  will  more  than  pay  the  cost  of 
these  labels. 

The  cabinet  designed  to  accommodate  catalogues 
under  this  system  is  unique,  in  that  it  is  so  arranged 
that  there  is  no  excuse  for  misplacing  a  catalogue. 
Cartons  are  furnished  of  uniform  width,  but  of  vary- 
ing depths  and  thicknesses.  Therefore  any  catalogue 
or  group  of  catalogues  can  be  enclosed  in  a  carton  of 
suitable  depth  and  thickness.  The  maintenance  of 
a  uniform  width  for  the  cartons  means  that  material 
will  not  slip  and  slide  about  in  the  file.  The  fact 
that  these  receptacles  are  dust-proof  is  a  valued 
feature  in  many  offices. 

Any  ordinary  bookcase  grouping  of  catalogues  by 
subjects  entails  considerable  loss  of  space,  because  of 
the  inequality  in  the  sizes,  but  in  this  system  e(?onomy 
of  space  has  been  considered  and  the  loss  has  been 
reduced  to  a  minimum.  The  same  advantages  could 
not  be  obtained  in  any  other  way. 

The  Universal  System  and  Standardization.— The 
most  important  aid  to  convenience  in  the  filing  of 
catalogues,  is  the  rapid  adoption  by  manufacturers 


THE  PURCHASING  LIBRARY 


213 


of  the  standard-size  bulletins  recommended  by  the 
American  Institute  of  Architects  and  other  technical 
societies.  These  bulletins  should  be  81/2  by  H  inches, 
without  covers,  and  each  should  treat  of  but  one  sub- 
ject, so  that  they  may  be  filed  in  any  letter  file,  and 
distributed  according  to  subject. 

These  standard-size  bulletins,  when  filed  in  the 
folders  invented  by  Mr.  Hooker,  and  used  in  con- 
nection with  his  index,  undoubtedly  constitute  the 
most  practical  solution  of  the  catalogue  problem  yet 
offered.  The  folders  are  devised  to  contain  the  bulle- 
tins in  such  a  manner  that  they  can  be  opened  flat 
without  being  removed  from  the  folder;  moreover, 
they  are  fastened  to  it,  so  that  it  is  impossible  to  mis- 
place them.  The  folder  is  prominently  marked  with 
the  group  number.  When  standardization  has  made 
sufficient  advance  to  warrant  the  adoption  of  this 
system,  it  should  command  very  wide  attention. 


I  M 


I  I 


I: 


CHAPTER  XI 

THE  USE  OF  CHAETS  AND  DIAGRAMS  IN 

PURCHASING 

Figures  and  Charts. — Every  purchasing  department 
is  interested  in  compiling,  asst^mbling,  and  recording 
facts  and  data  connected  with  materials  purchased 
and  consumed.  These  facts  and  data  may  be  quanti- 
tative, or  they  may  indicate  fluctuations  in  prices  and 
quotations  covering  varying  periods.  It  is  also  de- 
sirable in  some  cases  to  have  statistics  regarding  the 
particular  materials  or  commodities  that  bulk  large 
in  the  activities  of  the  establishment. 

Accurate  data  and  facts  are  extremely  important 
and  valuable,  but  if  they  are  not  clearly  presented 
the  results  to  be  gained  from  them  do  not  sliow  up  as 
they  should,  and  consequently  lose  mucli  of  their 
force.  The  proper  presentati(m,  therefore,  of  these 
records  is  ordinarily  of  as  much  importaiice  as  the 
facts  themselves. 

If,  for  instance,  a  tabulated  list  of  figures  is  being 
considered,  or  is  under  observation,  and  th(»se  figures 
indicate  the  consumption  or  purchase  of  a  commodity 
or  article  for  a  number  of  months  or  years,  denoting 
frequent  increases  or  decreases,  it  is  a  matter  of  some 
difficulty  to  get  a  comprehensive  grasp  of  them,  as 
compared  to  the  ease  with  which  the  same  facts  can 
be   assimilated  if  they   are   presented   so   as   to   be 

214 


CHARTS  AND  DIAGRAMS  215 

readily  visualized  in  the  shape  of  a  curve,  diagram, 
or  chart. 

When  totals  are  merely  footed,  each  conveys 
separate  facts,  however  lucidly  arranged;  but  when 
totals  are  connected  up  intelligently  in  a  chart,  a  suc- 
cession of  facts  is  presented  each  of  which,  while  it 
retains  its  particular  value  and  place,  is  a  component 
part  of  the  whole,  larger  fact  that  is  being  demon- 
strated m  unbroken  simplicity. 

Figures  are  for  recording  purposes,  and  convey 
pictures  of  weight  or  size.  Many  people  think  of 
these  pictures,  and  not  of  the  actual  figures.  Curves, 
charts,  and  diagrams  are  reproductions  of  these  pic- 
tures, proportioned  to  a  range  of  vision  that  makes 
them  almost  instantaneously  intelligible.  Before 
figures,  weights,  or  measures  were  used,  these  mental 
pictures  of  bulk  were  obtained  by  the  ancients  by 
crude,  but  similar,  means.  Examples  of  these  are 
found  to  the  present  day  in  the  terms  *^foot,"  indi- 
cating measurement,  and  ^* stone,"  under  which  desig- 
nation annealed  binding  wire  is  still  sold.  In  com- 
mercial usage,  *' stone"  indicates  twelve  pounds. 

When  figures  are  put  in  the  graphic  form  of  curves 
and  diagrams,  not  only  is  there  a  great  saving  in  the 
time  of  the  reader,  but  there  is  the  tremendous  ad- 
vantage that  one  can  absorb  more  facts  with  less 
danger  of  misinterpretation.  It  would  be  to  the  ad- 
vantage of  any  purchasing  department  to  present  in 
this  form  all  numerical  comparatives  or  fluctuations 
m  prices  for  the  assistance  of  the  executives  of  the 
establishment,  and  for  the  information  and  guidance 
of  the  department  iself. 


fm3 


216 


PURCHASING  AND  STORING 


Value  of  Charts  to  the  Buyer.— When  very  largi' 
purchases  are  made  of  some  commodity,  and  particu- 
larly of  such  things  as  valuable  metals,  it  is  vital  to 
good  buying  that  statistics  be  kept  of  production, 
consumption,  and  visible  supply,  and  that  these* 
statistics  show  variations  in  these  items,  together 
with  fluctuations  in  prices.  Not  all  purchasing 
agents  are  interested  in  expensive  metals,  except  as 
they  may  serve  to  indicate  the  general  business  con- 
ditions and  the  prosperity  -  of  the  country.  Purchas- 
ing agents  should,  however,  be  posted— as  should  all 
business  men— on  anything  which  is  liable  to  affect 
commerce  and  industry.  Probably  every  purchasing 
agent  is  buying  something  regarding  whicli  he  should 
have  reliable  information  clearly  set  forth  and,  rather 
than  depend  on  a  mass  of  figures,  he  will  find  it  pref- 
erable to  use  some  simpler  means  of  portraying 
that  information. 

The  simplest  and  most  generally  used  form  of 
curve  is  that  which  indicates  fluctuations  in  com- 
modities. This  type  is  seen  frequently  in  the 
journals  and  trade  papers  devoted  to  the  interests  of 
some  particular  product  or  commodity;  it  is  illus- 
trated in  Figures  31  and  32.  Usually  the  advances 
and  declines  in  the  commodity  in  its  raw  condition 
are  shown,  but  most  purchasing  agents  are  chiefly 
concerned  with  material  in  its  semi-manufactured 
state— for  instance,  metals  in  bars  and  sheets— and 
they  must  know  the  exact  variations  in  price  of  the 
commodity  in  the  condition  in  which  they  buy  it. 
The  periodicals  to  which  a  purchasing  agent  has 
access  cannot  always  be  depc^nded  upon  to  give  him 


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10  20      10  20      10  ZO       K)  ZO      K)  ZO 
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10  20 
JUME 

10  20 
JULY 

10  20 
AUG 

10  20 
SEPT 

10  20 
OCT. 

10  zo 
NOV 

10  20 
DEC 

FIG.  31.      CHART  SHOWING  RISE  IN  STEEL  PRICES 

DURING  ONE   YEAR 

Practically  every  article  of  which  steel  is  a  component  part 

followed  this  advance 


" ^' — 2iidYeM- __— 

riG.   32.      SPOT  AND  OPTION  PRICES   OF   COTTON  FOR  TWO  YEARS 

This  is  an  excellent  method  of  portraying  quantity,  because  it  rep- 
resents bulk  m  a  more  forceful  way  than  a  line  chart 
does.     (Courtesy  of  The  Annalist.) 

217 


i  ^1 


I    !'/1 


-,'l 


218 


PURCHASING  AND  STORING 


CHARTS  AND  DIAGRAMS 


219 


]h 


the  information  he  wants  in  the  way  in  which  he 
wants  it  presented.  The  necessity  therefore  arises 
for  him  to  collect  this  information  and  convert  it  in 
his  office  into  the  forms  in  which  it  will  best  meet  his 
requirements. 

A  point  which  all  buyers  should  bear  in  mind  is 
that  almost  invariably  any  cTiange  in  the  price  of  a 
semi-manufactured  article  is  preceded  by  a  corre- 
sponding change  in  the  price  of  the  raw  material 
which  enters  into  it.  A  chart  showing  both  curves 
would  be  a  valuable  aid  in  determining  the  psycolog- 
ical  moment  to  make  a  purchase.  By  way  of  ilhis- 
tration — the  fluctuations  in  the  price  of  hides  would 
undoubtedly  be  followed  by  corresponding  variations 
in  the  price  of  leather  belting.  These  fluctuations 
would  be  noticeable,  in  a  lessened  degree,  in  those 
articles  in  which  leather  is  a  small  component  part. 

Another  simple  graphic  form — used  principally  to 
set  forth  quantitative  facts — familiar  to  every  per- 
son who  follows  up  such  matters,  is  that  which  con- 
sists of  diagrams  with  vertical  or  horizontal  parallel 
lines,  each  of  which  denotes  a  certain  fact  for  a 
stipulated  period.  This  form  is  used  mainly  for 
showing  the  production  and  consumption  f»f  com- 
modities. It  can  be  used  to  great  advantage  in  the 
purchasing  department  in  connection  with  all  those 
articles  of  sufficient  importance  to  wariant  the 
preparation  of  charts.  These  diagrams  are  aids  to 
buying,  since  they  indicate  accurately  the  exact 
period  of  the  year  when  consumption  is  largest,  and 
the  exact  consumption  for  each  period.  In  some 
cases  they  are  not  so  well  adapted  as  the  line  charts 


for  demonstrating  these  features.  They  are,  how- 
ever, superior  in  some  respects,  since  a  variety  of 
geometric  symbols  can  be  used,  and  a  different 
symbol  may  be  used  in  connection  with  each  article. 
Another  advantage  of  this  form  is  that  these  dia- 
grams convey  the  impression  of  quantity  and  bulk 
more  forcibly  than  the  curves  in  a  line  chart.  (See 
Figure  32.) 

The  two  charts  shown  here  are  simply  offered  as 
suggestions.  It  rests  with  each  purchasing  depart- 
ment, individually,  to  decide  what  charts  shall  be 
prepared.  For  example,  if  a  curve  indicating  the 
price  of  wire  nails  is  kept,  it  will  be  found  to  bear 
an  almost  exactly  parallel  relation  to  the  price  curve 
of  steel  beams.  Allowance  being  made  for  variations 
in  production,  all  other  steel  products  would  follow  a 
similar  source.  In  the  case  of  large  buyers  of  cotton 
duck,  the  variation  in  price  can  be  approximately 
gauged  from  the  price  of  raw  cotton. 

When  accuracy  is  desired  in  the  price  curve  of  any 
article,  that  curve  must  be  based  upon  the  actual 
prices  of  the  article  itself.  Approximate  prices  only 
can  be  obtained  of  manufactured  articles  from  raw- 
material  price  curves.  For  example,  there  may  be 
an  over-production  of  wire  nails,  but  other  indus- 
tries that  consume  steel  may  be  taking  vast  quanti- 
ties of  raw  material,  depleting  the  market  and  ad- 
vancing the  price.  Until  the  over-production  of  wire 
nails  had  been  worked  off,  the  price  of  them  would 
not  advance  in  the  same  proportion  as  the  price  of 
some  other  steel  products,  and  consequently  there 
would  be  irregularity  for  a  time. 


220 


PURCHASING  AND  STORING 


CHARTS  AND  DIAGRAMS 


221 


li 


; 


compound  Information.— The  curve  charts  referred 
to  are  of  the  simplest  form,  but  they  can  be  added 
to  so  that  they  will  combine  additional  or  compound 
information.  When  such  additions  are  made,  dis- 
tinctive colors  should  be  used  for  each  curve.  The 
use  of  an  excessive  number  of  lines  on  a  chart  must 
be  avoided;  otherwise  the  chart  will  be  complicated 
to  such  an  extent  that  the  very  object  of  its  prepara- 
tion will  be  nullified. 

A  two-curve  chart  can  be  used  to  indicate  both 
consumption  and  price  at  the  same  time.  The  cor- 
rect relation  between  the  two  can  then  be  clearly  dis- 
cerned, and  the  influence  that  a  variation  in  one  has 
on  the  other  can  be  readily  observed. 

Three-curve  charts  are  particularly  useful  in  in- 
dicating consumption,  price  and  cost.  For  the  pur- 
pose of  illustration,  let  us  take  the  case  of  a  common 
article,  such  as  cotton  waste.  It  is  of  advantage  to 
use  this  particular  example  because  there  is  a  great 
variation  in  the  quality  of  cotton  waste  on  the  mar- 
ket, and  in  connection  with  any  such  article  a  com- 
parison must  be  kept  of  the  results  achieved  by  a 
change  in  substituting  one  quality  for  another. 
Moreover,  cotton  waste  is  very  generally  used,  and 
for  that  reason  the  application  of  the  principle  it  is 
desired  to  convey  would  appeal  to  a  larger  number 
than  if  I  took  as  an  example  an  article  purchased  by 
only  a  small  proportion  of  buyers.  It  is  not  to  be 
expected,  however,  that  when  the  purchases  of  ma- 
terials or  supplies  are  very  small,  extensive  or  ex- 
haustive data  should  be  kept. 

Let  us  assume  that  the  price  paid  per  pound  did 


not  vary  during  the  months  of  January,  February 
and  March,  but  that  in  April  it  was  decided  to  buy 
a  better  quality.  The  price  curve  would  immediately 
go  upward;  but  if  less  waste  were  used  the  consump- 
tion curve  would  go  downward.  From  these  two 
curves  the  actual  cost  curve  would  be  derived,  and  a 
graphic  demonstration  would  be  obtained  of  the  re- 
sults of  the  change  in  the  buying  policy.  An  illus- 
tration of  this  condition  is  given  in  Figure  33.  I 
would  suggest  that  every  purchasing  agent  keep  a 
chart  like  the  one  described.  This  form  of  triplicate 
chart  can  be  applied  to  almost  all  supplies  used  in  a 
plant,  and  is  particularly  valuable  in  keeping  records 
of  purchases  of  coal,  lubricants,  hack  saws,  files,  and 
so  on. 


1 

CONSUMP- 
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INPOUfiDS 

PRICE  PfR 

POUND 

IN  CENTS 

COST  IN 
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JAN. 

FEB 

MAR. 

APR. 

MAY 

JUNE 

JULY 

AUG. 

SEPT. 

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B  •=  Price  Curve 
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^Hi-» 

FIG.   33.      THREE-CURVE   CHART,    SHOWING   CONSUMPTION,    PRICE, 
ANP    COST   PER   MONTH   OF   COTTON    WASTE 


222 


PURCHASING  AND  STORING 


The  use  of  three-curve  charts  in  connection  with 
materials  used  in  production  work  requires  somewhat 
different  calculations  to  illustrate  similar  results,  be- 
cause any  variation  in  production  would  have  a 
greater  influence  on  the  consumption  curve.  It 
would  be  necessary,  in  this  case,  to  add  a  production 
curve. 

I  have  already  advocated  closer  relations  between 
the  sales,  production,  and  purchasing  departments. 
Buying  could  be  done  more  intelligently  and  more 
economically  if  estimates  of  future  requirements  were 
furnished  to  the  purchasing  agent  as  a  basis  upon 
which  he  could  make  his  purcliases  for  future  de- 
livery. This  is  not  always  done,  and  consequently 
the  purchasing  agent  is  often  compelled  to  rely  for 
this  information  entirely  upon  his  records  of  past 
purchases.  Instances  have  come  to  my  notice  in 
which  sales  were  increased  on  certain  articles,  while 
nothing  was  done  to  increase  the  stock  of  raw  ma- 
terial. If  a  maximum  and  a  minimum  have  been 
agreed  upon  for  a  stipulated  sales  quota,  then  any 
great  variation  from  those  standards  should  be  re- 
flected in  the  quantity  of  raw  material  carried  in 
stock. 

When  such  provision  has  not  been  made,  it  has 
sometimes  happened  that  requisitions  were  made  on 
the  purchasing  agent  to  buy  material  in  quantities 
greatly  in  excess  of  the  permissible  maximum.  These 
are  features  which  can  all  be  provided  for  by  the 
use  of  some  form  of  chart  or  diagram  which  will 
practically  enforce  automatic  raising  or  lowering  of 
the  stock  limits. 


CHARTS  AND  DIAGRAMS 


223 


Influence  of  Charts  on  Buying. — One  great  value 
to  the  purchasing  agent  of  the  use  of  charts,  is  that 
it  develops  keenness  of  vision.  A  few  charts  system- 
atically kept  over  a  period  of  sufficient  length  for 
comparative  purposes,  with  seasons  and  dates,  have 
been  known  to  give  a  buyer  an  outlook  on  the  future 
trend  of  prices  almost  uncanny  in  its  accuracy  and 
foresight. 

When  renewing  contracts,  or  when  making  agree- 
ments that  extend  over  any  long  period,  reference 
to  charts  is  the  only  scientific  way  to  obtain  the 
necessary  information  on  which  to  form  one's  judg- 
ment. Also,  in  such  cases,  the  chart  can  be  some- 
times used  with  good  effect  to  influence  the  seller, 
since  by  it  he  may  show  that  an  expiring  contract  re- 
sulted in  a  loss  to  the  buyer,  and  the  latter  may  be 
able  to  gain  concessions. 

There  is  another  purpose  in  the  use  of  these  charts: 
namely,  to  demonstrate  to  the  buyer  the  wisdom  of 
contracting  over  given  periods  for  any  stipulated 
commodity.  A  buyer's  obligation  to  keep  a  record 
of  values  has  not  ceased  simply  because  he  has  made 
a  contract.  He  should  be  able  to  show,  if  called 
upon  to  do  so,  that  the  contract  represented  a  wise 
expenditure.  Even  if  the  facts,  when  arrayed,  show 
that  the  contract  was  not  wise,  but  that  a  saving 
could  have  been  effected  by  buying  in  the  open  mar- 
ket, it  is  nevertheless  well  to  know  this  for  future 
guidance,  and  it  is  sometimes  as  well  for  the  buyer 
to  know  that  his  judgment  is  not  always  infallible. 

Scheduling  Requisitions  by  Charts.- -Those  con- 
cerns which,  from  force  of  circumstances,  practise  a 


M.lH 


11'  Ml 


h 


•I 


^4i^^'^<t 


m>  m 


224 


PURCHASING  AND  STORING 


l^lt 


**liand  to-mouth"  policy  in  purchasing,  and  buy  in 
the  open  market,  only  for  immediate  requirements,  do 
not  have  so  much  need  for  charts.  But  for  a  manu- 
facturing plant  that  can  make  up  a  schedule  of  its 
requirements  over  a  given  period  of  time,  records  of 
prices  are  imperative  if  the  most  economical  buying 
is  to  be  done.  These  can  be  presented  by  the  pur- 
chasing department  to  the  manufacturing  depart- 
ment. The  latter  can  then  make  up  the  requisitions 
for  quantities  required,  and  can,  moreover,  make  them 
up  at  the  times  most  favorable  for  purchasing,  as 
shown  by  the  price  record. 

Even  in  those  cases  in  which  buying  is  done  on  a 
** hand-to-mouth''  basis,  a  record  may  prove  valuable, 
because  if  the  record  can  show  that  saving  could 
be  effected  by  a  different  buying  policy  some  means 
may  be  adopted  for  putting  it  into  effect. 

Augmenting  Buyer's  Knowledge  of  Business  Con- 
ditions.— It  is  acknowledged  that  the  general  trend 
of  business,  and  of  most  prices,  can  be  forecasted  by 
the  output  of  the  principal  product  of  a  country. 
As  regards  a  country  like  Brazil,  for  instance,  whose 
prosperity  depends  mainly  on  rubber  and  coffee,  a 
chart  record  of  these  commodities  would  give 
valuable  information  to  establishments  buying  or 
selling  there.  In  the  United  States  the  situation  is 
more  complex,  because  our  industries  and  commodi- 
ties are  widely  diversified.  At  one  time,  the  pros- 
perity of  the  Southern  States  might  have  run  along 
lines  parallel  with  the  condition  of  the  cotton  busi- 
ness, but  for  the  whole  country  it  is  necessary  to 
watch    railroad    earnings,    building    permits,    bank 


CHARTS  AND  DIAGRAMS 


225 


clearings,  and  many  other  features.  However,  since 
steel  is  used  in  so  many  lines  of  business  the  situa- 
tion can  be  covered  by  keeping  a  record  of  the  un- 
filled orders  of  the  United  States  Steel  Corporation. 

Whatever  may  be  said  in  favor  of  the  use  of 
graphic  charts,  this  fact  must  not  be  overlook-ed:  It 
is  necessary  first  to  ascertain  the  correct  figures  from 
our  bookkeeping  methods  before  the  lines  can  be 
drawn  on  the  chart.  This  does  not  mean  that  the 
charts  are  not  of  value — as  I  have  said  before,  it  is 
decidedly  advantageous  not  to  have  to  digest  a  mass 
of  figures. 

Economical  buying  is  largely  a  result  of  keeping 
posted  on  market  conditions,  and  for  this  reason  it 
is  desirable  to  know  the  value  of  graphic  records 
portraying  these  and  other  features.  Personal 
opinion  as  to  the  trend  of  business  or  prices  is  mere 
guesswork  if  it  is  not  founded  upon  scientific  data. 
It  does  not  even  deserve  to  be  called  speculation 
because  the  latter  is  at  least  based  upon  some  funda- 
mental basic  principles. 


in 


CHAPTER  XII 

EOUTINE  WORK  OF   THE  PURCHASING 

DEPARTMENT 

Disposition  of  Incoming  Documents. — Every  pur- 
chasing department  receives  large  quantities  of  mail, 
including  correspondence,  quotations,  acknowledg- 
ments of  orders,  invoices,  shij)ping  documents,  cata- 
logues, pamphlets  and  quite  often  samples,  blue 
prints,  and  so  on.  There  are  also  the  inter-depart- 
ment communications,  inquiries,  and  requisitions.  All 
these  must  be  taken  care  of  in  an  intelligent  manner. 
Some  person  in  the  office  should  be  so  well  versed 
and  trained  in  its  routine  and  methods  as  to  be  able 
to  segregate  all  the  incoming  mail  and  documents 
and  pass  them  along  to  the  various  clerks  interested. 

There  are  many  heads  of  departments  who  seem  to 
think  they  are  neglecting  some  important  duties  if 
they  do  not  personally  handle  everything  that  goes 


Note: — Acknowle<lg:ement  is  tendered  to  Otis  Elevator  (company,  H. 
W.  Johns-Manville  Company.  Warner  Sugar  Refining  Company, 
and  Jeffrey  Manufacturing  Company,  for  permission  to  repro- 
duce tlie  forms  that  appear  in  the  following  chapters.  The 
reader  should  bear  in  mind,  however,  that  the  forms  are  used 
to  illustrate  the  methods  and  means  that  have  been  found  most 
suitable  in  the  jmrchasing  departments  of  these  well-known 
manufacturers.  While  I  have  drawn  attention  to  some  features 
connected  with  these  forms,  in  the  following  chaiiters  I  have 
confined  the  treatment  to  generalities,  and  have  not  specifically 
described  the  routine  followed  by  any  of  the  concerns  named. — 

THE  AUTHOB. 

226 


ROUTINE  OF  PURCHASING 


227 


through  the  department.  In  very  small  purchasing 
departments  something  may  be  gained  by  looking 
over  all  invoices,  and  all  replies  to  follow  up  requests. 
In  the  larger  departments,  however,  some  person 
should  be  made  responsible  for  each  division,  and  the 
documents  pertaining  to  his  work  should  be  turned 
directly  over  to  him,  since  such  a  system  will  allow 
the  head  of  the  department  more  time  for  the  larger 
affairs  and  for  management  and  organization.  If 
matters  of  importance  do  come  up,  in  any  division 
of  the  work,  which  need  the  personal  attention  of  the 
purchasing  agent,  he  should  of  course  attend  to  them, 
but  any  questions  regarding  normal  routine  work 
should  be  answered  by  the  person  who  has  charge 
of  that  particular  work. 

Accumulating^  and  Recording:  Information.— The 
routine  work  of  actually  making  a  purchase  begins 
with  the  receipt  of  the  requisition,  but  before  this 
can  be  dealt  with  intelligently  certain  information 
must  be  accumulated.  These  things  are  just  as  es- 
sential to  the  proper  conduct  of  the  office  work  as 
tlie  mechanical  equipment  is.  It  is  necessary  to  have 
desks,  stationery,  tiling  cases,  and  other  equipment, 
and  it  is  equally  necessary  to  prepare  the  information 
referred  to  in  previous  chapters  if  the  purchasing 
function  is  to  come  into  play  after  the  requisition  * 
arrives  in  the  department. 

I  have  already  discussed  in  previous  chapters  the 
character  of  the  information  necessary  for  a  pur- 
chasing department,  and  have  suggested  methods  for 
collecting  and  recording  it.  In  the  alignment  of  the 
work  in  the  department  and  the  assignment  of  it  to 


228 


PURCHASING  AND  STORING 


p. 


members  of  the  staff,  there  are  some  general  prin- 
ciples which  must  be  adhered  to.  Certain  classes  of 
information  must  be  accessible  to  everybody— cata- 
logues for  instance.  Another  class  of  information, 
such  as  that  relating  to  sources  of  supply,  is  of 
greater  moment  to  the  person  responsible  for  solicit- 
ing quotations  than  to  any  other  member  of  the  de- 
partment. The  invoice  clerk,  for  instance,  would 
have  no  use  for  it.  On  the  other  hand,  the  invoice 
clerk  has  constant  use  for  certain  price  lists  and  trade 
methods  of  figuring  extras  on  base  prices,  and  these 
are  seldom  needed  by  others,  although  they  may  be 
required  at  times  in  the  comparison  of  quotations. 

For  these  reasons  it  is  not  possible  to  define  a 
routine  method  for  the  work  of  collecting  and  record- 
ing information  which  would  fit  every  purchasing 
department.  But  whenever  it  is  feasible,  it  is  the 
best  plan  to  have  a  regular  bureau,  and  to  place  it  in 
charge  of  an  intelligent,  resourceful,  and  methodical 
man.  In  view  of  the  nature  of  the  work,  it  can  be 
conceived  that  he  can  render  service  of  exceptional 
value.  The  following  list  will  give  some  idea  of  what 
such  a  man  may  do. 

1.  He  should  have  charge  of  procuring,  listing, 
•assorting,  filing,  loaning,  and  securing  the  return  of 
catalogues.  This  subject  was  fuHy  treated  in  Chap- 
ter X. 

2.  He  may  prepare  such  charts  and  diagrams  as 
are  required  by  the  purchasing  agent.  Many  others 
will  suggest  themselves  to  him  in  the  course  of  his 
work.    Charts  have  been  discussed  in  Chapter  II. 


ROUTINE  OF  PURCHASING 


229 


3.  He  should  have  charge  of  all  specifications, 
and  should  maintain  a  sufficient  number  of  them.  If 
standard  definitions  are  in  force,  as  described  in 
Chapter  II,  he  has  charge  of  the  purchasing  depart- 
ment's copy. 

4.  He  can  compile  and  maintain  a  record  of 
sources  of  supply,  as  described — with  forms — in 
Chapter  III.  An  additional  form  is  given  in  Figure 
34;  this  is  used  in  the  purchasing  department  of 
H.  W.  Johns-Manville  Company.  It  will  be  noted 
that  approval  of  a  source  of  supply  is  given  only  by 
the  general  purchasing  agent.  The  reverse  side  of 
this  card  has  spaces,  numbered  to  correspond  with 
those  on  the  front,  for  recording  data  connected  with 
each  source  of  supply. 


SOURCES  OF  SUPPLY 

Approval  of  a  source  of  supply  is  only  to  be  given  by 
General  Purchasing  Agent. 

Classification 

Material 

NAME 

ADDRESS 

APPROVED 

DATE 

AUTHORITY 

1 

2 

^ 

1— 

18 

^^* 

19 

20 

21 

FIG.  34.      CARD  FOR  RECORDING  SOURCES  OP  SUPPLY 

This  8  by  9Vj-i"C'h  f-ard,  as  used  by  the  H.  W.  Johns-Manville  Co., 

has  spa(!e  for  21  items.    The  reverse  side  is  numbered  to  correspond 

with  the  fate,  and  is  used  for  recording  special  information. 


y/ 


i  ■  1 

! 


] 


i 
/•I 


\-M 

i 

LLIAL^M^M  B. 

iH 


V/ 


230 


PURCHASING  AND  STORING 


5.  Such  records  as  it  may  be  necessary  to  keep  re- 
garding quantities  purchased  over  any  given  period, 
should  also  be  in  this  man's  custody.  It  is  not 
always  necessary  for  the  purchasing  department  to 
compile  this  information  from  the  orders  placed,  be- 
cause it  is  often  furnished  to  the  department.  If  the 
reader  refers  to  the  requisition  form  of  the  Otis 
Elevator  Company,  Figure  35,  he  will  notice  that  at 
the  foot  of  the  sheet  there  are  spaces  in  which  th(' 
consumption  for  each  month  of  the  year  may  be  in- 
serted.    This  is  valuable  information,  because  from 


MCO.  NO. 


Otis  Elevator  Company 


DATE. 


.191  — 


CMAN9C  TO 
ACCOUNT    NO 

cbAsa 


PURCHASINO   A9ENT:    ruBASK  ISSUB  ONOKM  F»M  TMK  rOkUOWINO  rOM  DCUIVERV 


TO  WOMKS  —  DE^ARTMBNT    NO.. 

CHANOINO  BACH   ITCM  TO  ACCOUNTS  INDICATCO  IN   MAHOIN 


< 
Z 

o 


SMI^  VIA 


^ 


\ 1- 


usco  cumukmt 


*-.«•     ON    OHO*^ 


«•»«     OM   OHOdf* 


riCf DEO  OM    0«OSM« 


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•  ■aNCD. 


.Dl^T- 


A^^AOVCO. ^A^P«OV«0. 


»•*    MOAMIl 


PIG.  35.    1H;quisition  form 

Showing  method  employed  by  the  Otis  Elevator  Company 
of  inserting  consumption  for  each  month 


ROUTINE  OF  PURCHASING 


231 


Material.  „ 

Material  Record 

ITnl* 

YEAR 

» 

„ 

MONTH 

ManTUIc 

MUwaUkee    |        MaoviOe 

MUwiukee 

M«iiTiIle 

Milwaiiba. 

J«nn«ry 

l_ 

J 

" 

= 

B*=J 

DBS 

__ 

^ 

— 

;=, 

=*= 

FebniaiT 

Mtrch 

V 

■M 

Li 1 

bl'.i-i 

^ 

u u 

La 

a 

3d 

November           i 

~ 

1 

December 

riJ 

M. 

1 

J 

em 

- 

TOTAL 

^ 

-^=^= —'I 

FIG.  36.      MATERIAL  CONSUMED  RECORD 

Tho  figures  for  this  record  are  furnished  by  the  factories,  and  The 
repord  is  kept  in   the  purchasing  department 

it  one  can  determine  whether  the  consumption  is 
greater  at  one  season  than  another.  The  figures  are 
inserted  by  the  stores  department  before  the  requisi- 
tion reaches  the  purchasing  department. 

In  Figure  36  is  shown  the  method  pursued  by  the 
purchasing  department  of  H.  W.  Johns-Manville 
Company  for  keeping  a  record  of  material.  An  in- 
teresting feature  of  this  record  is  that  it  covers  a 
period  of  three  years,  and  the  separate  figures  are 
given  for  the  Manville  and  the  Milwaukee  factories. 
The  quantities  are  furnished  to  the  purchasing  de- 
partment by  the  factories,  and  the  sheets  made  up 
from  those  quantities.  Some  interesting  charts  of 
the  more  important  materials  could  be  compiled  from 
these  sheets. 

6.  The  estimate  of  quantities  required  in  the 
future  bears  a  close  relationship  to  the  record  of 
quantities  consumed  in  the  past.    In  normal  times, 


'IM^ 

1 

1 1  ■ 

PURCHASING  AND  STORING 


MATERIAL 

PRICE  RECORD 

UNIT 

a  — 

Not  Dclvd. 

Date 

Seller^ 
No 

DESCRIPTION 

Price 

Discount 

Term* 

Authority 

FIG.  37.      PRICE  RECORD 

A  distinction  is  made  by  symbol  between  prices  for  ptods  actually 

delivered  and  those  for  which  only  quotations  are  received.     The 

sellers'  names  are  listed  on  tlie  reverse  side  under 

their  key  numbers 

the  latter  may  so  closely  approximate  tlie  former 
that  it  can  be  accepted,  provided  there  are  no  radical 
manufacturing  changes.  If  there  are  any,  or  if  a  new 
class  of  material  is  to  be  procured,  the  purchasing  de- 
partment should  be  duly  advised.  In  any  of  these 
contingencies,  with  this  information  on  record,  the 
purchasing  agent  is  in  a  position  to  take  advantage 
of  any  favorable  market,  and  in  no  case  is  he  unaware 
of  what  the  future  demands  will  be. 

7.  So  much  has  been  said  regarding  price  records 
in  Chapter  IV,  on  ** Prices,"  and  in  Chapter  VII,  on 
** Invoices,"  that  further  discussion  is  scarcely  neces- 
sary, but  I  wish  to  call  attention  to  Figure  37,  a  form 
that  is  used  by  H.  W.  Johns-Manville  Company.    The 


ROUTINE  OF  PURCHASING 


233 


heading,  **Unit,"  is  for  pound,  ton,  yard,  and  so  on. 
The  sellers  are  listed  on  the  back,  by  number.  The 
last  column,  '* Authority,"  is  for  indicating  from 
what  document,  or  other  source,  the  price  was  ob- 
tained— such  as  order,  contract,  quotation,  and  so  on. 

8.  Another  class  of  information  is  that  relating 
to  the  physical  characteristics  of  purchases.  This 
can  be  collected  and  compiled  from  several  sources. 
There  are,  for  instance,  the  inspector's  reports,  which 
have  been  referred  to  in  Chapter  VI,  on  '* Delivery." 
Copies  of  these  should  always  come  to  the  purchasing 
department.  There  are  also  the  physical  and  chemi- 
cal tests,  and  all  the  reports  concerning  the  action  of 
materials  during  the  manufacturing  processes,  and  in 
the  form  of  finished  product. 

The  outline  just  given  includes  the  principal 
features  of  the  information  that  should  be  secured 
and  tabulated.  Possibly  in  some  purchasing  depart- 
ments other  data  will  be  found  necessary;  the  de- 
cision in  regard  to  this  point  will  vary  according  to 
individual  cases  and  circumstances.  The  accumula- 
tion of  the  data  is  largely  a  question  of  the  enter- 
prise and  initiative  of  the  man  in  charge  of  the  work, 
and  it  is  also  his  responsibility  not  to  amass  a  lot  of 
figures  and  records  not  pertinent  to  the  department's 
work,  of  no  value  to  the  staff,  and  not  conducive  to 
the  betterment  of  purchasing. 

The  Requisition.— The  requisition  is  the  tangible 
authorization  for  a  purchase;  it  is  therefore  an  im- 
portant document.  From  it  emanate  practically  all 
the  activities  associated  with  every  order  placed — 
in  fact,  it  is  the  basis  of  the  purchasing  structure. 


•.H 


u^i 


■^: 


1  !  :<y 


4\ 


f 


234 


PURCHASING  AND  STORING 


A  realization  of  the  importance  of  the  requisition 
renders  it  apparent  that  purchasing  without  it  must 
be  absolutely  prohibited.  If  this  rule  is  made  and 
strictly  adhered  to,  a  great  deal  of  confusion,  mis- 
understanding, and  turrnoil  will  be  avoided.  Verbal 
requests  to  buy  anything  should  not  be  recognized 
by  the  purchasing  department,  even  on  trivial  items. 
It  is  easy  to  misinterpret  verbal  instructions,  and  a 
mistake  made  in  a  small  purchase  would  involve  a 
larger  proportionate  loss  than  in  a  large  one.  If  the 
value  of  the  order  should  be  only  one  dollar,  and  it 
was  found  to  be  a  mistake,  it  might  cost  more  than 
that  amount  to  return  the  goods,  get  what  was 
actually  required,  and  make  the  proper  a<ljustments. 
There  is  no  visible  evidence  to  controvert  any  state- 
ments which  might  be  made  in  an  attempt  to  force 
the  purchasing  department  to  shoulder  thc^  blame — 
for  its  own  protection,  verbal  requests  must  be 
tabooed. 

There  may  be  occasion  when  some  department  will 
telephone  a  request  to  make  a  purchase  in  nuch  cases 
as  breakdowns,  but  such  a  request  should  be  im- 
mediately confirmed  by  a  formal  requisition.  The 
latter  should  reach  the  purchasing  departuK'nt  before 
the  order  is  written  up  and  mailed  to  ihv  seller,  in 
order  that,  if  any  misunderstanding  has  occurred,  it 
may  be  discovered  and  rectified  before  any  serious 
consequences  have  resulted.  A  purchase  may  be 
made  on  receipt  of  a  telegram  from  an  outlying 
factory;  but  if  there  is  any  danger  of  a  misinterpre- 
tation, a  reply  should  be  wired,  specifically  quoting 
any  sizes  or  figures  that  would  seem  to  be  open  to 


ROITINE  OP  PURCHASING 


235 


the  possibility  of  an  error.  The  importance  of  this 
precaution  is  emphasized  by  an  instance  in  which  a 
wire  w^as  sent,  requesting  the  purchase  for  immediate 
shipment  of  5,000  feet  of  300,000  circular  mils 
stranded  cable.  The  order  was  placed,  and  shipment 
made  before  the  requisition  arrived;  then  it  was 
found  that  the  order  read  500,000  circular  mils.  The 
mistake  was  made  by  the  telegraph  company,  but  the 
case  nevertheless  shows  the  necessity  of  always 
formally  confirming  such  requests,  if  errors  of  this 
kind  are  to  be  avoided. 

**Rush*'  Requisitions. — So  far  as  possible,  **rush'* 
requisitions  should  be  discouraged.  There  are  oc- 
casions, however,  when  material  must  be  obtained 
without  loss  of  time,  even  though  extra  expense  is 
entailed.  The  need  may  have  been  created  by  con- 
ditions impossible  to  foresee,  or  somebody  may  have 
been  negligent.  Whatever  the  cause  the  need  is  an 
actuality,  and  must  be  dealt  with  promptly.  The 
great  danger  in  connection  with  **rush"  requisitions 
is  the  abuse  of  the  power  contained  in  the  word 
*'rush."  There  is  always  a  tendency — w^hich  should 
be  curbed — to  mark  **rush"  many  requisitions  when 
the  relative  importance  of  them  does  not  warrant 
their  being  given  first  consideration. 

Regulations  should  be  formulated  and  enforced  re- 
stricting the  use  of  such  requisitions — otherwise  it 
will  be  found  that  they  will  constantly  increase  in 
number.  Sometimes,  w^hen  the  provision  for  *'rush" 
requisitions  is  abused,  the  word  **rush"  will  be  writ- 
ten perhaps  six  times  on  a  requisition,  on  the  theory 
that  repetition   of  this   magic   word  will   insure   all 


n 


I 


:i  j 


236 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


237 


possible  haste.  The  fault  often  lies  with  the  clerk 
who  writes  the  requisition,  and  may  not  be  noticed 
by  the  person  signing  it.  To  provide  against  this 
contingency,  **rush"  and  very  urgent  requisitions 
could  be  made  a  distinctive  color — red,  for  instance. 
The  urgency  of  the  case  could  not  then  fail  to  be 
noticed  by  the  person  signing  the  requisition  or  by 
the  purchasing  department. 

Fundamentals  Necessary. — It  is  essential  that  all 
requisitions  set  forth  certain  basic  facts,  that  they 
must  convey  information  of  definite  value  and  im- 
portance.   This  information  is  the  following: 

1.  All  requisitions  should  be  numbered. 

2.  They  should  clearly  show  the  point  of  origin; 
that  is,  the  department,  factory,  branch  or  other 
source  requiring  the  material.  While  it  is  not  im- 
perative, still  it  is  frequently  advisable,  to  have  a  dis- 
tinguishing color  or  letter  prefixed  to  the  number 
for  each  department;  this  facilitates  identification, 
and  is  of  great  help  in  filing. 

3.  They  must  be  signed  by  a  properly  constituted 
authority.  It  is  not  the  province  of  the  purchasing 
department  to  designate  the  persons  authorized  to 
draw  requisitions,  but  that  department  should  be 
furnished  with  the  names  of  such  persons. 

4.  Quantity,  size,  and  weight,  as  may  appear 
necessary,  must  be  distinctly  stated. 

5.  A  complete,  accurate,  and  definite  description 
of  the  material  or  article  required  must  be  given. 
A  request  for  four  feet  of  sh(>et  copper  one  eighth  of 
an  inch  thick  is  indefinite   and  vague;   yet   many 


such  requisitions  are  received  by  the  average  pur- 
chasing department.  All  requisitions  of  this  kind 
should  be  returned  with  a  request  for  fuller  informa- 
tion. The  width,  length,  and  gauge  should  be  stated, 
as  well  as  the  temper. 

6.  The  purpose  for  which  the  material  is  needed 
should  be  stated. 

7.  The  exact,  or  at  least  the  approximate,  date  on 
which  delivery  is  required  should  be  given.  This  is 
a  vital  item  of  information,  and  on  this  point  requisi- 
tions should  be  explicit  and  frank.  The  woes  of  a 
purchasing  department  are  greatest  in  connection 
with  delivery.  There  are  more  complaints  in  regard 
to  this  matter  than  concerning  all  others  combined; 
for  the  alleviation  of  this  condition  as  far  as  possible, 
honesty  to  start  with  is  of  the  greatest  assistance. 
It  is  foolish,  as  regards  delivery,  to  name  a  date 
ahead  of  requirements,  and  almost  as  bad  to  name  one 
too  late.  Either  fault  will  have  a  deterring  effect  on 
good  purchasing. 

Additional  Information. — The  features  enumerated 
are  the  basic  ones  which  are  absolutely  essential,  but 
there  are  other  points  to  be  considered.  Whenever 
possible,  requisitions  should  be  confined  to  single 
items,  or  at  least  to  material  of  the  same  character. 
For  instance,  several  items  of  brass  tubing  might 
appear  on  the  same  requisition,  but  if  items  for  lum- 
ber, screws,  and  other  material  foreign  to  brass  were 
grouped  together,  it  would  be  necessary  to  issue  a 
separate  order  for  each.  The  purchasing  department 
would  then  be  put  to  some  inconvenience  in  passing 


',  ■  '>K 


r  III 


r 


238 


PURCHASING  AND  STORING 


one  requisition  back  and  forth  among  the  employees, 
and  notations  would  have  to  be  made  on  it  of  each 
order  number,  name  of  seller,  and  so  on,  for  which 
there  might  be  convenient  space. 

It  is  possible  that  in  some  cases  it  might  be  ad- 
visable to  state  the  permissible  maximum  and  mini- 
mum, the  quantity  in  stock,  and  some  other  details, 
as  I  shall  explain  in  discussing  the  examples  of  requi- 
sitions which  follow. 

Samples  of  Requisitions.— Figure  35  is  th(^  form  of 
requisition  used  by  the  Otis  Elevator  Company  for 
factory  purposes.  The  great  majority  of  these  are 
written  up  by  the  clerks  who  keep  the  stores  physical 
records.  When  the  clerk  balances  his  inventory 
card,  on  making  entries  of  material  taken  from 
stores,  and  finds  that  the  minimum  has  been  reached, 
he  immediately  makes  out  a  requisition  for  the 
quantity  needed  to  bring  the  amount  of  material 
to  the  maximum,  and  passes  it  along  to  the  head 
storekeeper.  The  latter  signs  the  requisition— which 
is  in  quadruplicate— and  the  original  is  forwarded  at 
once  to  the  purchasing  deartment.  We  have  to  deal 
only  with  the  original  in  connection  with  purchasing. 

The  spaces  on  this  form  for  insertion  of  maximum, 
minimum,  and  other  features  are  not  primarily  for 
the  information  of  the  purchasing  department,  al- 
though the  latter  gives  them  due  consideration. 
Ordinarily,  the  amount  of  material  in  the  stores  and 
the  amount  requistioned  should,  together,  total  the 
maximum.  When  this  is  not  the  case  thei-e  is  some 
reason,  which  is  noted  in  the  space  headed  *'Ee- 
inarks."    For  example,  it  may  be  found  that  a  pur- 


ROUTINE  OF  PURCHASING 


239 


chase  can  be  effected  more  economically  for  some 
larger  quantity  which  would  exceed  the  maximum. 
In  such  an  event,  the  general  storekeeper  is  notified, 
and  on  his  authorization  the  larger  quantity  is  requi- 
sitioned. A  note  to  this  effect,  reading  **  Maxi- 
mum exceeded,  for  purchasing  reasons,"  would  ap- 
pear in  the  space  for  ** Remarks."  The  purchasing 
agent  also  keeps  the  general  storekeeper  advised  as 
to  the  time  required  to  obtain  various  materials. 
This  information  is  used  as  an  aid  in  determining 
whether  the  stock  is  to  be  maintained  on  a  monthly 
basis,  or  on  a  two,  three,  or  six  months'  basis,  or 
even  longer.  Except  for  these  features,  the  purchas- 
ing department  has  only  a  passing  interest  in  the 
figures  inserted  in  these  spaces. 

At  the  foot  of  this  form,  on  the  left-hand  side,  is 
a  space  for  the  signature  of  the  general  works  man- 
ager, but  his  approval  is  required  only  when  the  re- 
quisition is  for  machinery,  shop  equipment,  or  some- 
thing else  not  under  control  of  the  general  store- 
keeper. 

Figure  38  illustrates  quite  a  different  form  of 
requisition.  It  is  used  by  H.  W.  Johns-Manville  Com- 
pany in  their  various  factories.  It  will  be  noted  that 
it  is  drawn  by  the  foreman,  and  that  the  storekeeper 
fills  in  the  information  as  to  the  amount  of  stock  on 
hand  and  the  estimated  time  it  will  last. 

This  form  is  in  triplicate  and  has  a  stub,  which  is 
retained  by  the  foreman.  The  original  is  held  by  the 
purchasing  department,  one  copy  is  held  by  the  store- 
keeper, and  the  third  copy   (on  the  back  of  ticket 

C"  in  the  illustration)   goes  to  the  receiving  de- 


<< 


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i 


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FOREMAN'S  STUB 


Good* 


K   N?      249 


Ooaatity- 

For  Um  On  - 


Rcquiaitioo  iMued 


Order  Na 


Dcp'tNo.-- ,. 


REQUISITION  FOR  MATERIALS 
Dim 


K    N?      249 


Ordered  Fn^. 


Goods 

Qinntity  .  - 
Dimemioiia  . 
Oaality 


B: 


Stock  oaiMAd- 
WiU  1*« _ 


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Dep't  No 

Ordered  Ptom. 


REQUISITION  FOR  MATERIALS    K    ^^        ^49 


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Ouentitjr  — 
Dimcnnoae 
Quilira  — r- 


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To  be  need  for  — 
Weated  oof  later  I 


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APPROVED 


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ROUTINE  OF  PURCHASING 


241 


para  KMl-IMM 


Warner  Sugar  refining  Company 

EDCEWATER.-  N.  J. 


REFINERY    REQUISITION 


REQUIRED  r 
FOR        (. 


CHAROP... 


NO.  A 


2793 






--^. 



OBPANTMKNT   HCOUIWTION- 

Make  Order  to: 

APPROVED: 

MoMam 

O.  K. 

,.  ^...       1 

FIG.  40.      REQUISITION  FORM 

partment.  An  interesting  feature  is  ticket  "C,'* 
where  a  complete  record  is  kept  of  all  material  on 
the  order. 

Figure  40  is  an  illustration  of  the  requisition  form 
used  by  the  refineries  and  factories  of  the  Warner 
Sugar  Kefining  Company.  These  requisitions  are 
sent  to  the  head  office  in  New  York  City,  where  the 
general  purchasing  agent  is  located.  It  will  be  noted 
that  the  authorization  required  in  this  case  is  that  of 
the  manager  of  the  factory  or  refinery  where  the 
requisition  originates.  At  the  bottom  right-hand 
corner  is  a  feature  not  shown  in  the  preceding  ex- 
amples of  requisitions.  It  is  provided  to  enable  the 
purchasing  agent  to  put  his  O.  K.  on  the  requisition 


t . ;. 


t 


'f 


242 


PURCHASING  AND  STORING 


REQ   NO.. 

TELEPHONE  PURCHASE  SLIP 


TO  BE  CONFIRMED 


uate.. 


-19- 


MATERIAL. 


Requested  by. 


Factory. 


Placed  by 


With 


Per 


Price. 


F.  O.  B. 


Terms. 


Delv'y. 


FIG.   41.      CONFIRMATORY   TELEPHONE   REQUISITION 

after  the  detail  work  has  been  done  on  it,  and  before 
the  order  has  been  written  up. 

Figure  41  is  a  sample  of  a  form  used  for  an 
emergency  purpose;  I  commented  on  it  earlier  in 
this  chapter.  It  is  not  good  policy  to  receive  over 
the  telephone  these  requests  to  purchase,  and  have 
only  a  vague  memorandum  on  a  hastily  secured 
scratch  pad.  When  messages  are  taken  in  tliis  man- 
ner there  will  frequently  be  some  omission  of  an 
essential  detail,  whereas  if  one  uses  a  proper  form  on 
which  to  make  a  notation  of  the  message,  this  can- 
not happen.  A  formal  requisition  follows  the  tele- 
phone request,  and  this  should  be  marked  **  Con- 
firming telephone." 

In  connection  with  all  the  examples  given,  there 
are  matters  of  detail  which  must  be  settled  as  in- 
dividual circumstances  and  preferences  dictate. 
None  of  the  seven  fundamental  requirements,  how- 
ever, as  already  laid  down  as  necessary  for  every 
requisition,  can  be  neglected.    In  matters  of  detail, 


ROUTINE  OP  PURCHASING 


243 


for  example,  the  requisition  shown  in  Figure  35  does 
not  have  any  space  for  the  order  number — an  unusual 
omission.  The  reason  why  the  space  is  omitted  is 
that  the  stenographer  who  writes  up  the  order,  in 
stamping  the  requisition,  uses  a  large  rubber  stamp 
which  has  on  it  the  word,  '* Ordered"  and  a  space  for 
the  date  and  the  order  number.  This  method  has 
one  outstanding  advantage — the  impression  of  the 
rubber  stamp,  being  very  prominent,  is  clearly  seen, 
so  that  requisitions  already  dealt  with  are  easily  dis- 
tinguished from  requisitions  for  which  orders  have 
not  been  written  up. 

Routing  the  Requisition. — In  small  purchasing  de- 
partments, it  is  possible  for  all  requisitions  to  pass 
through  the  hands  of  the  purchasing  agent  himself. 
In  larger  departments,  they  may  go  over  the  desk  of 
the  chief  clerk,  who  may  review  them.  He  will  prob- 
ably mark  some  of  them  as  being  of  sufficient  im- 
portance to  be  dealt  with  or  to  be  brought  to  the  at- 
tention of  the  purchasing  agent.  In  still  larger  de- 
partments, it  may  be  found  advisable  to  let  the  re- 
quisition clerk  take  all  requisitions  first.  This 
method  would  relieve  the  chief  clerk  of  much  detail 
work,  as  many  of  the  requisitions  could  be  disposed 
of  without  going  through  his  hands.  Those  for  ma- 
terial for  which  there  is  a  blanket  contract,  or  for 
which  a  price  has  been  established,  could  be  passed 
along  for  the  order  to  be  written  up.  It  is  taken  for 
granted,  of  course,  that  all  features  of  the  requisition 
are  in  proper  order,  that  material  is  correctly  speci- 
fied, and  that  the  requisition  is  signed  by  some 
authorized  person. 


i! 

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m 


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r 


m 

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^f 

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i 

i  .' 

1           '  Bi^ 

PI 

2M 


PURCHASING  AND  STORING 


The  paying  teller  of  a  bank  would  not  cash  a  check 
until  he  had  noticed  the  date,  assured  himself  that  the 
signature  was  genuine,  and  made  sure  that  the 
amount  demanded  stood  to  the  credit  of  the  drawer 
on  the  books  of  the  bank.  A  requisition  lias  some 
features  which  are  analagous  to  those  of  a  check,  and 
these  features  require  examination.  For  example, 
the  requisition  clerk  must  see  that  the  requisition  is 
signed  by  some  person  who  has  the  necessary 
authority.  He  should  see  that  it  bears  the  date  upon 
which  it  was  drawn;  or,  what  is  more  essential,  the 
date  of  its  appearance  in  the  purchasing  department 
should  be  stamped  on  it.  The  specification  of  the 
material  or  article  must  be  closely  scrutinized  and,  if 
Bot  correct,  it  must  be  made  to  conform  to  the  stand- 
ard practice  as  explained  in  Chapter  II.  The  date  on 
which  delivery  is  required  should  be  definitely  stated. 
It  is  not  sufficient  to  say  **soon,"  *' quickly,"  or  *'as 
soon  as  possible."  These  expressions,  used  in  this 
connection,  have  no  real  definite  meaning,  whereas,  as 
previously  stated,  one  of  the  most  important  features 
of  a  requisition  is  the  honest  statement  of  a  delivery 
date.  If  a  requisition  fails  to  meet  any  of  the  tests 
to  which  it  is  subjected,  it  should  be  returned  to  the 
maker  for  correction. 

Pricing  Requisitions. — Having  satisfactoiily  passed 
the  tests,  the  requisition  should  be  priced.  It  is  pos- 
sible that  the  material  which  it  covers  has  already 
been  contracted  for — if  so,  all  that  is  then  necessary 
is  to  insert  the  contract  price,  delivery  point,  and  a 
notation  to  the  effect  that  the  order  is  issued  **0n 
account  of  contract  dated " 


ROUTINE  OP  PURCHASING 


245 


In  those  cases  in  which  competitive  prices  have  to 
be  obtained,  a  form  suitable  for  the  purpose  should 
be  used.  Figures  42  and  43  illustrate  quite  different 
styles  of  forms  for  requesting  quotations.  These  will 
serve  as  a  basis  for  a  similar  form  for  any  industrial 
establishment.  Care  should  be  exercised  in  the  word- 
ing of  these  forms,  to  prevent  their  being  mistaken 
for  orders.  These  inquiries  for  prices  are  sent  to  the 
selected  sources  of  supply,  as  fully  discussed  in 
Chapter    II.      If    the    material    is    correctly    and 


OTIS  ELEVATOR  COMPANY 

OFFICE   OF 
PURCHASING  AGENT 


Request 

for 
Quotation 


Please  quote  ON  THIS  SHEET  your  best  price  F.O.B. 


for  the  articles  specified  below  and  state  how  soon  you  can  furnish  the  same. 
Bid  on  each  item  separately  00  NOT  FAIL  TO  SIGN  THIS  BID 


Total 


Signature. 


Address. 


Requisition 


No. 


Purchase  Order 


No. 


FIG.  42.      REQUEST  FOR  QUOTATION 
The  paper  for  this  form  is  very  thin  so  that  a  number 

of  copies  may  be  made 


1/ 


i 


< 


H 


246 


PURCHASING  AND  STORING 


H 


OOVKM 


ooniwinTV 


H.  W.  JOHNS-MANVILLE  CO. 

MADISON  AVE.  k.  41A  STREET 
NEW  YORK  CITY 

»••■■•■  ■  ■  ■■■■■►••••••■I  — ■■••■■■■■■•■■■■»^^ 


INOLIKY 
NO. 


Date 


-X 


Plea*e  quote  the  following  mctirial  ?  O.  B. 
State  when  you  can  ship. 
State  terms  of  payment. 

Material  is  required  at  dettiaation  before _ 

This  is  not  an  order. 


OtrcA  reply  to 

H.  W.  JOHNS-MANVILLE  CO. 

PURCHASING    DEPARTMENT 
MadUon  Ave.  &  41«  Street 
NEW   YOU 
Attentloa  ol 


PIG.    43.      REQUEST    FOR    QUOTATION 

adequately  specified,  replies  are  usually  received  very 
promptly;  upon  receipt,  they  will  have  to  be  tabu- 
lated for  comparative  purposes.  It  is  possible  to 
have  the  back  of  the  requisition  arranged  for  the 
tabulation  and  comparison  of  prices.  Such  an  ar- 
rangement renders  unnecessary  the  use  of  a  special 
form,  and  whenever  it  is  found  necessary  to  look  up 
the  quotations  received  on  any  requisition,  the  search 
is  greatly  simplified  if  it  is  possible  to  refer  to  tli(i 
requisition  itself.  However,  this  is  not  always  pos- 
sible— a  special  form  for  quotation  purposes  ia  illus- 
trated in  Figure  44.    This  is  a  very  useful  form;  in 


ROUTINE  OF  PURCHASING 


247 


UUktSBx 

COMPETITION  SHEET 

* 



Material 
Date 

Last  Purchaae 
Date 

BIDDER 

F.  O.  B. 

TERMS 

*-- 1 

— ^ 

^. 

FIG.  44.   FORM  FOR  TABULATING  QUOTATIONS 

those  cases  in  which  the  price  clerk  has  not  the 
authority  to  decide  on  the  acceptance  of  any  bid,  it 
furnishes  a  brief,  clear  and  concise  method  of  pre- 
senting the  quotations  to  the  purchasing  agent  or 
chief  clerk  for  decision.  It  makes  it  unnecessary  for 
either  of  these  persons  to  wade  through  each  quota- 
tion. All  bids  should  be  read  very  carefully,  since 
it  is  a  very  common  occurrence  for  the  prices  to  be 
made  on  a  basis  different  from  that  indicated  in  the 
quotation  request.  This  is  particularly  noticeable  in 
connection  with  the  delivery  point.  Very  frequently 
these  quotation  forms  come  back  with  prices  named 
at  varying  f .  o.  b.  points,  even  though  the  requests  all 
named  a  uniform  specific  point  of  delivery.  In  these 
cases,  the  freight  from  f.  o.  b.  point  to  destination 
would  have  a  bearing  on  the  quotations. 


-i 


)!.' 


li 


248 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


249 


When  a  purchase  is  made  h)cally,  the  prices  can  be 
obtained  by  telephone  and  written  on  the  back  of 
the  requisition,  but  it  is  imperative  that  the  bidders 
should  be  made  to  understand  clearly  what  is  being 
inquired  for,  and  that  the  name  of  the  party  quoting 
the  price  be  ascertained  and  noted.  A  memorandum 
should  always  be  made  on  th(^  requisition  stating  th(» 
accepted  price  and  the  fact  that  the  order  is  in  ac- 
cordance with  the  quotation  made  by  telephone  by 
Mr. on .  If  the  order  is  plac(^d  by  tele- 
phone, or  verbally  with  a  salesman,  a  memorandum 
should  be  made  to  that  effect,  so  that  when  the  order 
is  written  up  it  can  be  marked  '*  Confirming  tek^phone 
order''  or  ** Confirming  verbal  order  given  to  your 
Mr. today." 

These  points  are  important.  They  might  seem 
trivial  to  the  casual  reader,  but  in  an  experience  in 
which  it  was  necessary  to  tdephone  an  average  of 
fifty  to  sixty  orders  every  day  it  was  found  that  they 
were  vital.  Much  confusion  resulted  either  if  the 
price  or  the  '* Confirming  tek-phone  order,''  etc.,  was 
omitted  by  the  price  clerk,  or  if  these  were  over- 
looked by  the  clerk  when  he  wrote  up  the  order. 
There  is  the  possibility  that  goods  may  })e  shipped 
out  of  the  warehouse  by  the  seller  immediately  after 
the  receipt  of  the  telephone  order,  and  that  then  on 
receipt  of  the  formal  order  an  additionjd  shipment 
may  be  made  duplicating  the  first  one.  Only  a  rigid 
adherence  to  the  rules  laid  down  can  prevent  such  an 
occurrence.  When  the  work  on  a  recpiisition  is 
finished,  it  is  passed  along  to  the  order  clerk  in  order 
that  the  formal  order  may  be  written  up.    Before 


leaving  this  subject,  however,   I   wish  to  treat  the 
disposition  and  filing  of  the  requisitions. 

It  will  have  been  gathered  from  what  has  already 
been  said  that  there  is  no  standard  type  of  requisition 
with  respect  to  either  size  or  wording.  For  the 
great  majority  of  industrial  establishments  the  most 
useful  size  is  probably  about  8V2  inches  square.  The 
ideal  requisition  should  be  arranged  with  spaces  for 
the  insertion  of  the  following: 

Checked  by Priced  by 

Price  obtained  from  contract 

'*  **  *'      quotation 

F.  0.  B 

Order  from Order  No 


When  these  spaces  have  been  used  for  their  indi- 
cated purposes  as  the  requisition  has  passed  along 
to  be  finally  disposed  of,  and  when  the  requisition 
finally  completes  its  journey  through  the  department, 
there  is  a  clean-cut,  complete  document  telling  a 
concise  and  intelligent  story.  There  is  no  reason 
why  proper  places  should  not  be  provided  for  the 
particulars  indicated.  To  make  the  notations  in 
various  places  on  the  requisitions  is  a  ragged,  loose 
method,  and  much  confusion  will  result  if  reference 
has  to  be  made  at  any  future  time  to  the  document. 

Every  requisition  should  be  numbered,  and  for  pur- 
poses of  identification  the  order  number  must  also 
be  inserted  on  the  requisition,  and  the  requisition 
number  on  the  order.  These  numbers  connect  them 
in  such  a  way  that  reference  from  one  to  the  other 
is  quick  and  certain.    Because  of  the  importance  of 


'4 


Mil 


>  I 


V 


250 


PURCHASING  AND  STORING 


the  requisitions,  they  must  be  preserved  for  such 
periods  as  may  be  found  necessary  in  each  individual 
case.  The  best  scheme  is  undoubtedly  to  use  post 
binders,  retaining  the  system  of  numerical  sequence 
in  filing.  Many  thousands  can  be  ke])t  by  this 
method,  economically  and  in  a  very  limited  space;  the 
requisitions  are  easy  of  access  and  cannot  be  mis- 
placed. There  are  a  few  departments  that  use  the 
vertical  filing  system;  in  these  cases  the  purchasing 
department's  copy  is  made  of  fairly  heavy  stock  in 
order  that  it  may  stand  the  use  to  which  it  is  put. 
Requisitions  should  be  numbered  when  printed.  The 
spacing  should  be  arranged  to  conform  to  type- 
writer spacing,  and  all  copies  should  register. 

In  conclusion  it  is  worth  while  to  emphasize  the 
fact  that  every  purchase  should  be  sanctioned  by  a 
requisition.  In  the  case  of  verbal  or  telephone  re- 
quests to  purchase,  requisitions  should  always  be 
exacted.  Verbal  requests  to  purchase  should  be 
sanctioned  as  seldom  as  possible.  If  conditions  and 
circumstances  do  not  warrant  them,  the  purchasing 
agent  should  take  a  determined  stand  in  the  matter 
and  refuse  to  honor  them. 


CHAPTER  XIII 

ADDITIONAL    ROUTINE    WORK    OF    THE 
PURCHASING  DEPARTMENT 

Contracts. — ^Before  discussing  the  routine  work  con- 
nected with  the  order,  which  follows  in  logical 
sequence  after  the  requisition,  I  wish  to  discuss  the 
subject  of  contracts,  since  many  orders  apply  on  con- 
tracts which  may  be  in  force. 

Practically  all  industrial  establishments  of  any 
magnitude  find  it  essential  to  cover  part  or  all  of 
their  requirements  of  certain  materials  with  blanket 
contracts.  These  have  been  discussed  in  Chapter  V— 
they  are,  in  effect,  somewhat  similar  to  a  bank  ac- 
count. Every  time  an  order  is  made  out  to  apply  on 
a  contract,  the  proceeding  can  be  compared  to  draw- 
ing a  check  against  an  account.  Contracts  of  this 
nature  are  really  arrangements  made  in  advance  of 
the  actual  need  of  the  material.  Although  it  may  be 
definitely  agreed  to  take  a  specific  quantity  in  a 
given  time,  the  actual  need  and  instructions  to 
forward  are  represented  by  the  order,  which  follows 
on  the  receipt  of  the  requisition. 

Contracts  are  entered  into  by  the  purchasing  agent 
with  the  known  requirements  of  the  factory  as  a 
basis.  The  selection  of  the  materials  or  supplies 
which  it  is  thought  advisable  to  place  contracts  for, 
is  entirely  within  the  jurisdiction  of  the  purchasing 

251 


I       I 


r 


.V 


252 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


253 


agent,  altliongh  any  action  he  may  take  will  probably 
be  subject  to  the  approval  of  the  directois  or  execu- 
tives. It  is  customary  for  the  purchasing-  agent  to 
conduct  personally  the  negotiations  in  connection 
with  these  contracts,  using  his  knowledge  of  busi- 
ness conditions,  markets,  prices,  available  sources  of 
supply,  and  all  other  factors  which  have  previously 
been  discussed. 

There  are  many  forms  of  these  contracts— one  of 
them  was  given  in  Chapter  V,  Figure  15.  Another  is 
given  here.  Figure  45.  In  connection  with  this  it  will, 
of  course,  be  appreciated  that  there  are  some  stipula- 
tions in  such  a  contract  which  cannot  always  be  en- 
forced, particularly  in  strenuous  times,  when  the 
sellers  have  the  upper  hand  to  a  large  extent.  In 
ordinary  times  it  is  very  useful,  and  is  generally  ac- 
cepted by  the  sellers;  it  has  been  found  a  workable 
form  of  contract  by  some  of  the  largest  industrial 
establishments.  Like  all  other  contracts,  it  must  be 
administered  in  a  spirit  of  fairness  and  mutual  con- 
fidence. Provided  this  spirit  forms  a  basis  for  the 
relations  between  the  buyer  and  the  seller,  there  is 
nothing  agreed-  to  in  this  form  of  contract  that  can- 
not be  performed. 


CONTRACT 

between   the   smith-jonks    mfg.    co.,    (the   Pur- 
chaser)   and 

the  (Seller)  for  famishing '. 

for  a  period  of months, 

commencing 


Material: 

Material  shall  be 

Quantity: 

Quantity  shall  be  the  entire  requirements  of  the 
Purchaser  at  its  factorii. . .   now,  and  for  some 

time,    in   operation \ 

located  at 

or  at  any  other  point  where  the  Purchaser  may 
require  the  material  for  its  own  uses. 

Quality: 

The  quality  of  the  material  shall  be 

and  must  be  satisfactory  to  the  Purchaser.  If,  at 
any  time,  material  furnished  is  not  satisfactory 
to  the  Purchaser,  and  the  Seller,  upon  due  notice 
in  writing  does  not  forthwith  make  the  same  satis- 
factory, the  Purchaser  shall  have  the  right  to 
terminate  the  entire  contract,  if  it  so  elects.  The 
Purchaser  shall  have  the  right  to  return  all  un- 
satisfactory goods  for  credit,  at  the  expense  of 
the  Seller.  Such  credit  shall  be  in  cash  or  goods 
covered  by  this  contract,  at  the  option  of  the 
Purchaser. 

Price: 

The  price  shall  be 

Delivery: 

Delivery  at  the  above  price  shall  be  made  F.  0.  B. 

Deliveries  shall  be  made  at  such  times  and  at  such 
places  as  the  Purchaser  may  designate  by  formal 
orders.  If  the  Seller  does  not  make  deliveries 
with  reasonable  promptness  the  rights  of  the  Pur- 
chaser shall  not  be  forfeited  by  making  purchases 
elsewhere. 


'4. 


'  * 


II 


254 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


255 


Terms: 


Terms  of  payment  shall  be 


Routing: 

The  Purchaser  shall  have  the  right  to  route  all 
shipments,  provided  however,  that  such  routing 
on  material  sold  at  delivered  prices  shall  not  in- 
crease the  cost  of  delivery. 

Packages: 

Material  sold  by  weight  shall  be  charged  at  net 
weight  not  including  weight  of  packages.  No 
charge  for  package,  container,  cartage  or  other- 
wise, shall  be  made  unless  specifically  herein 
agreed. 

Renewal: 

The  Purchaser  has  the  right  to  renew  this  con- 
tract for  a  like  period  of  time  at  the  same  prices 
and  terms. 

Patents: 

The  Seller  agrees  to  defend  at  his  solo  cost  and 
expense  any  suits  brought  against  the  Purchaser 
for  alleged  infringement  of  letters  patent  by 
reason  of  use  or  sale  of  goods  covered  by  this  con- 
tract, and  to  make  good  to  Purchaser  any 
damages,  costs  or  money  recoveries  resulting  from 
such  suits. 

General: 

This  contract  is  subject  to  strikes,  fires,  accidents 
or  any  cause  for  delay  beyond  the  control  of  the 
Purchaser  or  Seller. 


DATE 


Accepted : 

SMITH- JONES  MFG.  CO., 


Accepted 


FIG.  45.     FORM  OF  CONTRACT  FOR  INDUSTRUL  PURCHASES 


CONTRACT    RECORD 

CONTRACTOR 

MATERIAL 

DATE 

EXPIRES 

QUANTITY 

PRICE 

SHIPMENTS 

Date 

QUANTITY 
UNIT 

VALUE 

Date 

QUANTITY 
UNIT 

VALUE 

_ 

■ 

. 

^ 

J- 

^ 

^_ 

— L 

.. ^ 

r^ 

^ 

PIG.  46.      RECORD  OF  SHIPMENTS  AND  PROGRESS  IN  FILUNG  ORDERS 

As  stated  in  the  delivery  clause  of  the  contract, 
Figure  45,  formal  orders  will  be  issued  from  time  to 
time  as  the  material  is  required.  But  as  these  orders 
are  scattered  through  the  binders,  in  regular  numeri- 
cal sequence,  with  orders  for  other  materials  and 
supplies,  it  is  necessary  to  keep  a  record  of  the 
shipments  made  against  the  contract.  This  require- 
ment is  provided  for  by  the  form  shown  in  Figure 
46.  It  is  important  to  keep  an  accurate  record  of 
these  shipments;  they  should  be  posted  on  the  con- 
tract record,  from  the  invoices  and  not  from  the 


256 


PURCHASING  AND  STORINd 


ROUTINE  OF  PURCHASING 


257 


orders.  The  reason  is  that  the  full  quantity  ordered 
may  not  be  shipped,  and  in  a  constantly  advancing 
market  the  buyer  might  be  short  of  a  very  large 
quantity.  Where  these  conditions  prevail,  pressure 
must  be  exerted  to  obtain  the  contract  quantity. 

Orders. — The  order  form  is  the  most  important 
document  used  by  the  purchasing  department.  It  is 
a  legally  binding  obligation  on  the  buyer  if  it  is 
issued  in  acceptance  of  a  quotation,  or  if  it  is  issued 
as  an  offer  to  buy  and  is  accepted  by  the  seller. 
While  it  is  unnecessary  to  employ  intricate  legal 
phraseology  in  the  text  of  an  order,  nevertheless  there 
are  certain  technicalities  which  must  be  complied 
with,  and  which  arise  in  the  ordinary  transaction  of 
the  business. 

Some  manufacturers  attach  greater  importance 
than  others  to  the  insertion  of  all  clauses  covering 
the  various  conditions.  This  will  appear  from  the 
illustrations  that  follow.  Some  also  require  acknowl- 
edgments, while  others  will  waive  these.  The  car- 
dinal points  that  must  appear  on  every  order  have 
been  discussed  in  Chapter  V,  but  the  routine  work 
of  the  purchasing  department  may  include  some  other 
features.  For  example,  if  invoices  in  duplicate  or 
triplicate  are  required,  the  fact  should  be  stated  on 
the  order.  Some  sellers  are  very  tardy  in  sending  in 
invoices,  and  as  promptness  in  this  respect  is  essen- 
tial to  the  efficient  working  of  the  purchasing  depart- 
ment, as  well  as  to  the  cost,  auditing  and  financial 
departments,  something  might  be  included  regarding 
this  point.  These  and  similar  matters  must  be  left, 
however,  to  individual  decision. 


Acknowledgment  of  Orders.— In  regard  to  acknowl- 
edgments of  orders,  these  are  difficult  to  get  in  every 
case.  Nearly  all  attempts— no  matter  what  the 
method— to  secure  acknowledgments  are  treated  in  a 
perfunctory  manner  by  the  sellers.  One  scheme,  as 
illustrated  in  Figure  47,  is  to  have  a  perforated  slip 
attached  to  the  order,  to  be  signed  by  the  recipient 
and  returned  to  the  buyer.  This  order  form  is  a 
splendid  example  of  a  very  complete  and  well-framed 
order.  Mr.  J.  R.  Pels,  purchasing  agent  of  the  War- 
ner Sugar  Refinery  Company,  expresses  himself  as 
follows  on  this  subject: 

I  have  given  the  conditions  printed  on  the  reverse  side  of 
this  order  much  attention,  and  find  them  very  useful.  I 
am  very  particular  about  having  the  perforated  acceptance 
slips  returned,  signed  in  such  a  manner  as  to  make  the  signa- 
ture binding  m  law,  and  I  have  found  at  times  that  this 
acceptance  of  the  order  has  saved  us  a  great  deal  of  annoy- 
ance, and  considerable  money  in  some  instances. 

Other  schemes  for  getting  acknowledgments  are  to 
send  separate  acceptance  forms,  or  to  send  postcards 
with  the  orders,  but  probably  these  receive  less  at- 
tention than  the  perforated  slips.  A  good  scheme  is 
to  send  the  order  to  the  seller  in  duplicate;  the  two 
copies  are  identical,  except  that  the  one  to  be  signed 
by  the  seller  and  returned  to  the  buyer  bears  this 
clause,  **  Receipt  is  acknowledged  of  this  order  and 
the  conditions  are  accepted  by  us.     Signed " 

Generally  speaking,  acknowledgments  are  not  of  such 
great  moment  in  connection  with  orders  issued  on  ac- 
count of  contracts,  or  for  orders  issued  in  acceptance 
of  a  written  quotation  from  the  seller.     In  the  former 


'•      M 


,1 


i 

ni 


I 


ROUTINE  OF  PURCHASING 


259 


case,  the  contract  is  closed,  and  the  order  is  really  a 
form  of  delivery  instructions.  In  the  latter,  the  order 
completes  the  contract.  The  main  advantage  in  ob- 
taining an  acknowledgment  in  these  instances,  is  to 
secure  an  assurance  from  the  seller  that  he  actually 
received  the  order.  Acknowledgments  are  very  es- 
sential when  orders  are  issued  for  material  for  which 
there  has  been  no  previous  offer  to  sell.  Because 
there  has  been  no  *' meeting  of  minds,''  there  is  no 
agreement  and  consequently  no  contract.  As  I  have 
already  explained,  the  order  is  simply  an  offer  to 
buy,  and  to  complete  the  agreement  an  acceptance 
from  the  seller  is  necessary. 

Figures  48  and  49  are  also  excellent  examples  of 
purchase  orders.  The  former  has  conditions  printed 
on  the  reverse  side,  while  the  latter  has  some  condi- 
tions printed  at  the  foot,  with  a  blank  space  sufficient 
for  the  insertion  of  any  special  conditions  that  might 
be  necessary  with  certain  orders.  All  these  orders 
are  in  triplicate  or  quadruplicate.  In  the  progress  of 
the  discussion  of  routine  work,  these  copies  will  come 
in  for  consideration. 

Writing  Up  Orders.— In  the  last  chapter  I  ex- 
plained the  active  work  of  the  requisition.  It  has 
also  a  negative  duty  to  perform,  for  from  it  the  order 
must  be  written  up.  The  digression  which  has  taken 
place  from  the  end  of  the  last  chapter  to  the  present 
point  has  been  essential  to  the  explanation  of  some  of 
the  features  connected  with  contracts  and  orders.  I 
shall  now  consider  the  requisition  in  its  completed 
state,  and  continue  with  the  progress  of  the  routine 
work.    The  order  clerk  has  only  to  transcribe  cor- 


■  n 


fn 


!.l 


Purchasing  Department 


H.  W.  JOHNS-MANVILLE  CO. 

Madison  Are.  &  41st  St,  NEW  YORK,  R.  T. 


sMlSS  £.""«"»■ 


Date 


ortDtR  Ma. 
RCaNak 


•HIP  TO 


VI* 


aUANTITV 


H.  W.  JOHNS-MANVILLE  CO. 


F.  W.  ROWE. 
General  Purctietlng  Agent 


nTSuna  «HI»  COMTRACT  SUBJECT  TO   CONDITIONS    PRINTED   ON   BACK  MCRtOr 

CONDITIONS 
GUARANTEE 

ROUTE 

Unless  otherwise  specifled.  ship  by  freight  unless  express  chsrses  are  approximately  the  mnei 
MARKINGS 

Purchase  order  namber  must  be  shown  on  all  packages  or  ahipment  wiu  not  be  accepted. 
SHIPMENT 

Shipment  must  actually  U  effected  within   the  time  .t.ile.l  in  Purchase  Order,  falline  In  which  .*  reevre  la  eumel.^ 
SVrflmB      ^  "  elsewhere  and  charge  you  with  ««r  J«*i  i«urr«l  lb.  ^o,  unle.,  d..er,«i  .h,p».JT^  ^C)^'^ 

Orders  subject    t«   cancellation    In   case   of   .inkes.   lire  or  ct,nditlon.  beyond  our  control  or  affacllng  our  oiMration'a. 
All  material,  purch.-ised  on  weight  bas.s.  unless  otherwise  a.r.nged  tor.  will  be  .eitlod  for  at  n.t  weight,  not  Includlu 
weight  of  package  or  container.  "■••■".  "">  inEiuauis 

INVOICES 

Bender  Invoices  In  triplicate  on  date  of  shipment,  and  separate  inrolce  for  each  order 

Note  Shipping  weight  on  Invoice  and  accompany  by  bill  of  l-vding  ahow.nis  freight  rale.     Purcbeae  order  number  must 
appear  on  Invoic^L  -w^  «#««• 

DRAFTS 

No  drafts  for  purchases  made  by  this  company  wlU  be  honereC 

PACKING  AND  CARTAGE 

A^JltJ*'^'^"  "'"  •*,""<"'*''  ""■  Pa'^klng.  bosing  or  carcige  unl-ss  agreed  upon  In  writing  at  th.  U(ne  of  purelUM.  but 
damages  to  any  mataial  not  packed  to  Insure  proper  protectui.  to  aar^  w.U  be  charged  to  you.  I™rc«.«,  ma 


PAYMENTS 


I'r'  tL'vT"^"',"  "•»'"•*  ■""'  •>'»'J««»  «<>  e»<*  diacount  samn  win  be  dikounted  10  days  from  r«.lpt  of  correct  inTole^ 
If  above  Instruction  are   not   compiled   with.   Invoices  c.inn.  i  be  passed  for  payment  mTOc* 


RAGS 


Of  matlnal    deduTnn/'/'"'*"'   Z'  ""k  '.'"""""'   '"°'"»  ""  """'  "^'  """'*"'  ""  ">•  ""^  "  ">•  "«>""■  following  receipt 
01  material,  deducling  !  per  cent,  cash  discount  al  that  tlrr.c  tn  r.u  cl.-\>»  net  ■»«•»'• 

Of  a^y  m"!rnr^  ".'LT'""'  '*"'"r''  ""•  '"  »">'  ""'"^  -"- "*  2^'"  "'  ■~-^»'  -ndfOI. ■Inrolc..  received  after  Ih.  IbC 
Of  aiiy  mon  h  will  be  treated  as  invoices  of  such  month.    Order  gi^tn  subject  to  above  conditions 

vniess  invoices  a.e  mailed  on  shipping  date,  the  discount  prnod  will  be  calcuUted  from  date  of  reeelpfof 

We  reserve  the  r«ht  to  adjust  any  Irregularities  against  suUwquent  shlpmenla. 


•na.^'s"'luV,lS'*f!;'m\r'^*'°'*^°"  '!''!'"''■''•'"■•'""''''•••'    '"'    »*'""«'    •»    »"•   "'*    •"'»    "<"   "•■"    ""-blsh   or   any 

U  .    Xni  ;educ.troVa"t:ar:;^7t  T.=:fJ^t^  --'ea-ei::  1-^^ fn^rC '">  "  — • 

All   wasle  m.Tl.rial  and  oullhrowa  to  be  disposed   of  by    us 
_lour_ac,.eplance  al  our  order  consliiutea  agreement  to  above  ti^ma. 


FIG.  48.      ORDER  FORM  AND  ACCOMPANYING  CONDITIONS 
"^he  conditions  shown  below  are  printed  on  the  reverse  side. 

260 


ROUTINE  OF  PURCHASING 


261 


THE.  JEFFREY  MFG.  CO. 


Not*  Thli  Numtotr  •«  lAv«le* 


ORDER  No.  o      33319 


PURCHASE  AND  STORES 
DEPARTMENT 


:i 


COLUMBUS,  OHIO. 


SHIP  TO 


VIA 


MAIL  ALL  CORRES.ONO.NCt.  INVO.CM  AND  .H.rr.NO  DOCUM.NTS  PEBT.IN.NO  TO  THIS  ORDER,  TO 

PURCHASING   OCPARTSSCNT. 

THE  JEFFREY  MANUFACTURING  OO. 

ON  MATCRIAL  SOLD  p.  O.  •.  COLUMBUS    TaAfti«»Aa<r.<«>>Au  *>..<.  ...^-. 

PURCHASE  NUMBER  MUST  S^P^Tr'on  ,;;o7c.^"Vd  PiTcS^^G^"  """  "  "*"*• 


RENDER  DUPLICATE  INVOICE  WITH  PRICES 


FIG.  49.      ORDER  FORM  WITH  SPACE  FOR  ADDITIONAL  CONDITIONS 

rectly  to  the  order  form  the  particulars  on  the  re- 
quisitioiie  Every  order  should  be  checked  before 
inailiiig,  and  in  the  case  of  those  of  any  consequence 
It  IS  particularly  important  that  this  checking  never 
he  omitted.  It  is  absolutely  imperative  to  check 
these  orders  for  which  acknowledgments  are  de- 
inanded.  It  will  be  observed  that  in  the  form  shown 
in  Figure  47  a  space  is  provided  for  the  initials  of 
the  person  who  checks  the  order.  The  order  clerk 
should  be  responsible  for  the  proper  distribution  of 
the  copies,  and  should  have  charge  of  the  purchasing 
department's  copy  until  it  is  taken  over  by  the  fol- 
low-up  clerk. 


^-^ 


i 


'f 

4 
■ 

if! 

H    I 

%  ^  { 

iff 


i 


I 


262 


PURCHASING  AND  STORING 


It  is  generally  the  practice  to  keep  the  copy  of 
orders  in  the  purchasing  department  in  a  post  bindor. 
This  scheme  is  used  by  the  Otis  Elevator  Company — 
actually  100,000  copies  are  kept  with  a  minimum  of 
trouble  in  the  smallest  possible  space,  and  they  are  so 
easy  to  refer  to  that  it  is  no  more  difficult  to  find  a 
copy  than  it  is  to  find  a  given  page  in  the  Encyclo- 
pedia Brittanica  if  one  has  all  the  volumes  in  front 
of  him.  Mr.  F.  W.  Kowe,  general  purchasing  agent 
of  H.  W.  Johns-Manville  Company,  says,  in  connec- 
tion with  the  purchasing  department's  copy  of  their 
orders:  ** Although  this  is  a  loose-leaf  form,  we  have 
recently  found  it  just  as  safe  to  handle  these  as  to 
handle  cards  in  an  open  index  file  or  tray." 

It  is  sometimes  necessary  to  make  changes  in  an 
order  after  it  has  been  sent  to  the  seller — most  often 
in  connection  with  delivery  dates.  Written  instruc- 
tions on  such  points  must  be  sent  to  the  seller.  An 
excellent  plan  for  taking  care  of  this  feature  is  illus- 
trated in  Figure  50;  it  has  so  many  advantages  over 
writing  a  letter  that  it  should  be  universally  adopted. 
The  form,  termed  an  instruction  sheet,  is  identical,  in 
size  and  spacing,  to  the  order  form.  A  copy  is  kept 
in  the  purchasing  department,  and  is  filed  with  the 
copy  of  the  order,  to  which  it  can  be  fastened  if 
necessary.  Since  it  is  of  a  distinctive  color,  it  can- 
not escape  observation  when  in  the  file.  If  a  letter  is 
written,  additional  work  is  involved  in  making  a 
notation  on  the  copy  of  the  order,  and  this  notation 
may  sometimes  be  overlooked.  Moreover,  the  copy 
of  the  letter  gets  into  the  general  file,  and  a  record 
of  the  change  in  the  order  is  lost. 


ROUTINE  OF  PURCHASING 


263 


INSTRUCTION  SHEET 


jH.  W.  JOHNS-MANVILLE  CO. 


Msditoa  Ave.  &  41A  Street.  NEW  YORK. 

DAT! 


MO.  I 


rCEASE  OBSERVE  THE  FOLLOWING  INSTRUCTIONS  APTLYINC  TO 
OUR  ABOVE  ORDER 


THIS  CANCXU  ANY  PKEVIOUS  INSTRUCTIONS  ISSUED  ON  THIS  OROUt 

H.  W.  JOHNS-MANVILLE  Ca 

rimcHAifNc  osn. 


FIG.  50.      INSTRUCTION  SHEET 

This  form,  as  noted,  pertains  only  to  orders  bearing 

the  same  number. 

In  some  establishments  there  is  a  rale — usually 
made  for  financial  or  auditing  reasons— to  the  effect 
that  the  copy  of  the  order  kept  in  the  purchasing 
department  must  bear  the  price  of  the  material  or  the 
article  ordered.  It  may  not  always  be  possible  to 
insert  the  price  before  the  order  leaves  the  office, 
since  the  seller  may  be  located  at  some  distant  point. 
In  such  an  event,  it  would  take  several  days  to  secure 
a  quotation,  and  valuable  time  be  lost  if  it  should  be 
necessary  to  get  the  order  placed  quickly.  Under  cir- 
cumstances of  this  kind  a  letter  can  be  written  giving 
the  particulars  of  requirements,  with  instractions  to 
proceed,  and  asking  the  seller  to  state  the  price. 
When  the  latter  has  done  this,  a  formal  order  may  be 
issued.  However,  many  sellers  will  not  proceed 
without  a  formal  order,  and  so  it  is  better  to  send  the 
formal  order  and  request  that  a  statement  of  the 


264 


PURCHASING  AND  STORING 


price  be  sent  by  return  mail.  Some  firms  use  a  form 
for  this  purpose  if  they  issue  many  such  orders;  an 
illustration  of  su6h  a  form  is  shown  in  Figure  51. 

Vaxiations  in  Routine  Work. — For  the  sake  of  out- 
lining a  well-defined  route  for  the  work  of  a  purchas- 
ing department,  I  have  assumed  that  the  progress  of 
that  work  depends  on  a  succession  of  individuals 
whose  duty  it  is  to  handle  certain  developments  as 
the  work  is  carried  to  completion.  It  is  literally  true 
that  the  purchasing  activities  must  follow  a  well- 
defined  course,  and  that  there  is  a  logical  rotation 
for  them,  but  it  is  not  true  that  there  must  be  a  cor- 
responding succession  of  individuals  each  of  whom 
would  handle  a  different  activity  or  function. 

In  some  purchasing  departments  there  are  several 
men  engaged  in  obtaining  prices  and  telephoning 
orders,  and  each  of  them  writes  up  his  own  orders. 
In  other  departments  the  re(]uisitions  are  divided  up 
among  several  men,  who  verify  them,  insert  prices, 
make  the  necessary  notations  on  them,  and  pass  them 
along  to  boys  or  girls,  who  write  them  up.  In  either 
of  these  cases  the  orders  are  collected  as  fast  as  they 
are  written  by  a  clerk,  who  puts  them  through  the 
final  checking  and  filing  stages  already  described. 
Whatever  changes  there  are  in  the  personal  element 
in  handling  the  work,  there  must  not  be  any  de- 
viation from  the  fixed  stages  through  which  the  pur- 
chasing function  should  proceed  step  by  step. 

Purchase  Order  Record. — As  fast  as  the  orders  are 
written  up — and  before  they  are  filed,  or  immediately 
afterwards — a  record  of  them  must  be  made.  This 
record  is  in  the  nature  of  an  index  of  material.    An 


ROUTINE  OF  PURCHASING 


265 


THE  J.  B.  WHITE  EIGIIEERING  CORPORATIOI 

ENGINEERS  CONTRACTORS 

43  EXCHANGE  PLACE. 

NEW  YORK 


19 


Gentlemen i 

ORDER  No.~ 


CONTRACT 


Ple«.e  ref.r  to   our  order  of  the  above  number  and    place  hereon,  in  .pace  allotted   below, 
your  very   be*t   quotation   covering   the  item*  included  in   the   order. 

Your*  vtry  truly, 

THE  J  6.  WHITE  ENGINEERING  CORPORATION 

C.  N.  CHILSON 

Manaom  or  PuncMA^aa 


By- 


THE  J.  0.  WHITE  ENOINEERINQ  CORPORATION 

Gentlemen  > 

We   quote    below    our    very    be.t    price*    covering    the    item,    mentioned    on  your  order 
of    the  above  number. 


Total  Price 


FIG.   51.      REQUEST   FOR  PRICE  ON  ORDER  ALREADY  ISSUED 


266 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


267 


1 

Our  Order 
No. 

Date 

of 

Ordef 

D«pt. 
Order- 
ing 

SELLER 

Weight  or 
Quantity 
Ordered 

MATERIAL 

Charge  To 

Price 

Of 

Rate 

■ 



PIG.  52.      PURCHASE  ORDER  RECORD 

A  separate  sheet  is  used  for  each  kiinl  of  material.  The  sheets  an* 
then  bound  in  a  leather  covered  binder  and  indexed  with  leather  tabs 

index  of  orders  under  the  seller's  names  is  rarely 
necessary,  but  there  are  isolated  cases  where  it  might 
be  advisable  to  keep  one.  A  record  under  the  name 
of  the  material,  however,  can  seldom  b(»  dispensed 
^th — the  value  of  it  is  evidenced  by  the  constant 
reference  to  it.  The  form  used  can  be  framed  to 
serve  many  useful  purposes;  it  can  be  utilized  for 
compiling  the  prices  paid  for  all  purchases,  also  for 
arriving  at  the  total  quantities  of  each  article  and 
each  kind  of  material  purchased.  It  also  furnishes  a 
list  of  all  sellers  of  each  article  and  each  kind  of 
material. 

Attention  was  called  to  this  record  in  Chapter  IT, 
and  Figure  8  illustrated  a  suitable  form  for  many 
departments.  An  additional  example  is  shown  in 
Figure  52.  The  arrangement  of  this  form  is  really  a 
matter  of  individual  requirements.  If  either  of  the 
records  mentioned  in  the  last  paragraph  is  the  more 
important  to  the  department,  or  if  it  is  desired  to 


make  one  of  them  the  most  prominent  feature,  the 
form  can  be  readily  rearranged — as  a  matter  of  fact 
it  can  be  made  to  conform  to  practically  any  condi- 
tion. 

Delivery  Problems. — ^When  material  has  been  pur- 
chased, an  order  placed  for  it,  and  a  satisfactory  de- 
livery date  set,  it  would  seem  that  the  purchasing 
department  has  practically  completed  the  work  con- 
nected with  the  transaction.  This  is  far  from  being 
the  case,  for  if  the  matter  were  allowed  to  remain 
in  a  quiescent  state  when  it  had  reached  this  stage, 
every  advantage  stipulated  in  the  contract  might  be 
lost  to  the  buyer.  Getting  quotations  and  getting 
sellers  to  accept  orders  is  relatively  easy  work  com- 
pared to  getting  them  to  make  deliveries  at  certain 
promised  dates. 

There  are  probably  a  few  purchasing  departments 
free  from  any  serious  delivery  problems,  but  gen- 
erally speaking,  delivery  is  the  phase  of  purchasing 
in  which  it  is.  most  difficult  to  get  satisfactory  re- 
sults. Complaints  against  the  purchasing  depart- 
ment occur  more  frequently  on  account  of  delivery 
questions  than  from  all  other  causes  combined. 

Following  Up  Orders. — ^It  is  highly  important  that 
every  order  be  *' followed  up."  This  means  that  the 
intent  and  purpose  of  the  order  must  be  followed  to 
their  logical  conclusion,  the  contract  must  be  com- 
pleted by  the  delivery  of  the  goods,  and  payment 
must  be  made  for  them.  There  are  innumerable 
schemes  for  taking  care  of  this  work,  and  each  of 
these  is  probably  somewhat  different  from  the  others 
in  detail   and   application.    With   each   and   all  of 


'•■1 


in 


'1v 


268 


PURCHASING  AND  STORING 


1. 
2. 
3. 


them,  however,  the  largest  factor  of  success  is  con- 
sistent, persistent,  and  unremitting  attention. 

For  the  purposes  of  the  present  discussion,  every 
order  can  be  placed  in  one  of  three  classes : 

Ordei^  on  which  no  delivery  has  been  made,  and  on 
which  no  invoice  has  been  received. 

Orders  on  which  delivery  has  been  made,  but  on  which 
no  invoice  has  been  received. 

Completed  orders,  on  which  delivery  has  been  com- 
pleted and  invoice  received. 

The  question  at  once  arises  as  to  the  manner  of 
separating  the  orders  to  preserve  these  classifications. 
This  depends  largely  on  the  follow-up  system 
adopted,  as  well  as  upon  the  number  of  orders.  If 
there  are  only  a  limited  number,  say  a  quantity  not 
exceeding  an  average  of  twenty-five  orders  a  day,  it 
is  quite  possible  to  keep  the  iirst  two  classes  in  tem- 
porary binders,  and  to  transfer  them  to  the  perma- 
nent file  when  the  desired  object  has  been  attained. 
This  is  all  the  more  feasible  if  many  of  these  should 
be  orders  for  immediate  delivery,  for  then  they  would 
be  sure  to  be  quickly  disposed  of.  On  the  other  hand, 
if  the  orders  are  in  excess  of  tlie  quantity  named,  and 
if  many  of  them  are  for  deferred  delivery,  an  extra 
copy  of  the  order  must  be  made  and  must  remain  in 
possession  of  the  person  in  charge  of  getting  de- 
livery, until  his  work  is  completed.  Then,  if  the  in- 
voice is  not  received,  it  will  pass  along  to  the  invoice 
clerk. 

The  latter  scheme — which  involves  the  making  of 
an  extra  copy  of  the  order — is  necessary  because  if 
there  is  only  one  copy  in  the  department,  and  it  is 


ROUTINE  OF  PURCHASING 


269 


held  out  of  the  permanent  file  until  delivery  is  com- 
pleted and  all  invoices  rendered,  the  number  so  held 
out  would  reach  such  large  proportions  that  the 
work  of  later  transferring  them  to  the  permanent  file 
in  proper  numerical  sequence  would  be  a  serious 
problem.  The  records  of  delivery  and  invoices,  how- 
ever, must  appear  on  the  copy  in  the  permanent  file. 
Therefore,  it  is  necessary  when  delivery  is  made  to 
make  this  record  on  such  copy.  The  temporary  copy 
can  receive  a  check  mark  of  some  description,  indi- 
cating that  this  has  been  done,  and  it  then  will  pass 
to  the  invoice  clerk. 

The  advantages  of  segregating  the  copies  to  pre- 
serve the  threefold  classification,  are  the  following: 

1.  The  permanent  file  of  copies  of  orders,  which 
are  usually  of  thin  stock,  are  subject  to  less  handling 
and  are  preserved  intact.  These  copies  have  a  per- 
manent location  in  the  department,  and  can  always 
be  referred  to  by  any  member  of  the  staff,  at  any 
time,  without  interference  with  the  work  of  the  fol- 
low-up and  invoice  clerks. 

2.  The  clerk  in  charge  of  delivery  always  has  at 
hand,  for  his  own  particular  use,  copies  of  all  orders 
he  is  interested  in.  This  advantage  is  valuable  be- 
cause he  is  not  obliged  to  refer  to  the  permanent  file, 
which  may  be  located  at  some  distance  from  his  desk, 
and  at  the  time  he  needed  one  of  the  binders  another 
member  of  the  department  might  be  using  it.  Or, 
should  he  not  have  these  copies,  he  might  have  to 
transcribe  in  longhand  onto  cards  the  details  of  each 
order  he  had  to  follow  up. 


II 


i> 


Ml 


270 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


271 


it 


3.  The  invoice  clerk  always  has  a  complete  file  of 
those  orders  against  which  invoices  have  not  been 
received.  Many  purchasing  departments  are  lax  in 
this  respect,  paying  little  or  no  attention  to  the  re- 
ceipt of  invoices.  If  the  invoices  come  in,  **well  and 
good."  If  they  never  come  in,  still  it  is  **well  and 
good."  Since  the  purchasing  cycle  is  not  complete 
without  the  invoice,  its  prompt  delivery  should  be 
insisted  upon.  Under  this  scheme,  also,  it  is  possible 
to  give  a  prompt  answer  to  the  financial  department 
should  a  request  be  made  for  a  statement  as  to  the 
value  of  material  ordered  but  not  invoiced. 

The  routine  of  follow-up  work  really  begins  at  the 
time  the  order  is  mailed  to  the  seller;  therefore,  if 
acknowledgments  are  to  be  secured,  they  come 
within  this  category.  In  some  purchasing  depart- 
ments, a  great  many  city  orders  are  telephoned  to 
the  sellers.  Delivery  of  some  of  these  is  effected 
before  the  formal  confirmation  is  mailed.  In  all 
such  cases,  the  orders  pass  immediately  into  the 
second  class.  There  are  also  a  great  many  orders 
which  call  for  immediate  shipment;  if  delivery  is 
made  at  once,  these  orders  would  also  pass  into  the 
second  class.  In  both  cases  cited,  the  invoices 
should  be  received  promptly;  when  they  are  re- 
ceived, the  orders  are  automatically  transferred  to 
the  last  class. 

In  any  scheme  for  getting  acknowledgments  and 
delivery,  the  copy  of  the  order  should  be  used  for 
recording  any  action  taken  and  promises  made,  be 
cause  thus  the  complete  story  is  kept  together.    I 
these  records  are  kept  on  separate  cards  or  sheets, 


FOLLOW-UP 

GOODS  RECEIVED 

INVOICES 

Date 

Action  taken 

Date 

Quantity 

Rec'g 
Slip 

No. 

Date 

Quantity 

Amount 

• 

1 

FIG.   53.      REVERSE   OF   ORDER-SHEET   RETAINED   BY   THE 
PURCHASING   DEPARTMENT 

Showing  the  scheme  for  recording  follow-up  work,  receipt 
of  material,  and  invoice  work 

a  lot  of  unnecessary  work  is  entailed  in  trans- 
ferring the  particulars  of  the  order  to  the  card. 
Or,  if  this  is  not  done,  then  it  is  constantly  neces- 
sary to  refer  to  the  order  for  particulars  concerning 
the  material,  dates,  and  so  on.  Paper  of  different 
colors  should  be  used  for  all  copies  of  orders — 
then  it  will  be  impossible  for  them  to  get  into  the 
wrong  channels.  » 

The  copies  of  orders  retained  in  the  purchasing 
department  should  be  printed  on  the  reverse  side  as 
illustrated  in  Figure  53.  The  question  arises  as  to 
the  manner  of  dealing  with  these  copies.  When 
only  a  small  number  of  orders  have  to  be  followed 
up,  the   copies   can  all  be  looked   over   daily,   and 


i 


'    I' 


272 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


273 


those  which  need  attention  can  be  selected.  If  it 
is  not  necessary  to  keep  them  in  numerical  order, 
they  can  be  arranged  in  pigeon  holes,  one  for  each 
day  of  the  month.  But  the  more  numerous  the 
orders,  the  more  essential  is  it  to  keep  them  in 
numerical  sequence.  When  they  are  kept  in  this 
way,  a  card  for  each  day  of  the  month  can  be  filed, 
and  on  the  cards  only  the  order  numbers  need  be  . 
noted.  Each  day's  card  would  then  indicate  those 
orders  which  needed  attention  on  that  day. 

There  is  one  big  advantage  in  securing  an 
acknowledgment  from  the  recipient  of  an  order — 
the  acknowledgment  usually  contains  the  seller's 
promise  of  delivery,  and  this  is  something  tangible 
with  which  to  start  the  follow-up  work.  Many 
orders  are  sent  out  with  a  delivery  date  specified, 
but  this  is  often  the  date  set  by  the  buyer  as  indi- 
cating when  he  requires  the  material,  and  is  not 
based  on  any  promise  from  the  seller. 

As  explained  previously,  the  great  difficulty  en- 
countered in  this  work  is  that  of  obtaining  satis- 
factory replies  or,  sometimes,  replies  of  any  kind 
from  the  shippers,  but  they  can  be  secured  through 
persistent  effort.  It  will  pay  to  use  discrimina- 
tion— to  ask  for  information  only  when  absolutely 
necessary,  and  to  refrain  from  making  unimportant 
inquiries  will  help  materially.  Shippers  will  (quickly 
respond  to  such  consideration.  A  large  number  of  in- 
discriminate inquiries  would  only  tend  to  make  the 
shippers  resent  the  uncalled  for  importunities  of  the 
buyer,  and  eventually  the  former  would  siinply  become 
indifferent  and  refuse  to  pay  any  attention  at  all. 


The  form  and  manner  in  which  the  inqury  is  made 
will  have  a  large  influence  in  determining  its  measure 
of  success.  All  city  and  local  inquiries  can  be  made 
by  telephone,  and  the  record  of  them  can  be  placed 
on  the  order  at  the  time  the  message  is  received. 
The  inquiries  which  it  may  be  necessary  to  mail,  if 
couched  in  brief  but  courteous  language,  will  bring 
better  results  than  if  abruptly  expressed.  The  prin- 
cipal point  is  to  get  a  reply.  A  form  used  with  con- 
siderable success  is  illustrated  in  Figure  54 — it  has 
been  found  that  a  very  small  percentage  of  inquiries 
of  this  type  have  failed  to  bring  replies.  In  more  im- 
portant and  urgent  cases  it  is  desirable  to  follow  the 
first  inquiry  with  some  such  form  letter  as  the  one 
illustrated  in  Figure  55.  The  percentage  of  these  fol- 
low-ups that  have  failed  to  bring  answers  is  so  small 
as  to  be  almost  neglible,  and  if  they,  in  turn,  were 
followed  by  a  specially  worded  personal  letter,  re- 
sults could  always  be  secured.  The  success  of  all 
efforts  of  this  character  depends  on  the  insistence  on 
getting  replies,  properly  recording  the  information, 
and  pursuing  the  matter  at  the  exact  time  it  is  neces- 
sary to  get  information. 

So  far  the  discussion  connected  with  the  following 
up  of  orders  has  been  confined  to  the  matter  of  get- 
ting promises,  but  promises  are  intangible  things  at 
best.  A  satisfactory  conclusion  and  the  final  dis- 
position of  the  problem  is  secured  only  when  the 
evidence  of  shipment  is  received.  The  bill  of  lading, 
shipping  notice,  or  other  document,  should  pass 
through  the  hands  of  the  follow-up  clerk,  should  be 
recorded  on  the  copy  of  the  order,  and  then  should 


■fP 


I'M. 


274 


PURCHASING  AND  STORING 


roRM  mt  (Riv.  s^it) 

Follow  Up  on  Material  Orders 

▼o                                                              Date 

1 
t 

PLEASE  ADVISE  8EUOW  WHEN 
YOU       WILU       SHIP       MATERIAI. 
SPECIFIED      ON      OUR      ORDER           ' 

DATE 

OUR   NO 

VOUR  NO 

SHOP   IMO 

>. 

Otis  Euevator  Company 

OFFICE 

Reply  (do  not  detach  from  above) 

DATE 

THE  ABOVE  ORDER                                                      SHIPPED 

FROM                                                                                             VIA 

REMARKS: 

SIONEO 

FIG.  54.   FORM  USED  FOR  FOLLOWING  UP  ORDERS 

be  passed  along  to  the  receiving  department  or  the 
traffic  department,  as  conditions  demand. 

Another  phase  of  the  work  connected  with  delivery 
has  to  do  with  inspection  made  at  seller's  factory 
or  point  of  shipment.  This  matter  has  been  discusst'd 
in  detail  in  Chapter  VI.  On  receipt  of  the  inspector's 
report,  a  notation  regarding  it  should  be  made  on  the 
copy  of  the  order,  as  should  also  reports  from  special 


ROUTINE  OF  PURCHASING 


275 


OTIS  ELEVATOR  COMPANY 


NEW  YORK 


puricHAjiNO 

DtPARTMEMT. 


tUMNTM  AVCNM 
«*•  TWWTV-SXTM  STKRT 


Gentlemen: 


Our  order 


dated 


covering 


for  our 


eontalned  the  following  statement: 


"SHIPMENT  TO  BE  MADE  OM  OR  BBPORE- 


Unle33  advised  to  the  contrary  at  once,  wo  will  understand 
that  shipment  will  be  made  on  or  before  this  date." 

We  have  assumed  in  the  absence  of  contrary  advices  from  you,  that  you  will 
maJce  shipment  by  at  the  latest,  but  as  prompt  shipment  is  now  very 

essential,  we  wish  to  be  assured  that  there  will  be  no  delays,  and  you  will  please 
advise  date  by  return  mall  when  shipment  will  be  made. 

If  shipment  has  been  made,  send  us  shipping  papers  with  invoice  at  once, 
and  in  the  event  that  you  have  already  dona  so,  please  furnish  shipping  particulars 
when  replying  nevertheless. 


Yours  very  truly, 


OTIS  ELEVATOR  COMPAHY 
W.  E.  HODOMAN, 

General  Purchasing  Agent. 

By 


REPLY 
Mall  tO! 

Otis  Elevator  Company, 
11th  Avenue  &  26th  Street, 
New  York  City. 


(Do  not  detach  from  above) 


-19— 


THE  ABOVE  ORDER 


SHIPPED.. 


FROM 


VIA_ 


K2MARKS 


SIGNED  . 


FIG.    55.      FORM    LETTER    FOR    FOLLOWING    UP 
MATERIAL  SHIPMENTS 


276 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


277 


Ponn  V^  (R.V.  3-M6)                                ■  p^^^^^g     ^^p^^^ 

IQ 

OUR  P.  O.  No.. .    AS  FOLLOWS, 

WILL    BE   ailPPED FROM 

VU  __ •* 

REMARKS: 

PURCHASING  DEPARTMINT, 

W.  E.  HODCMAN,  GENERAL  PURCHASING  AGENT. 

BY 

FIG.    56.      PROGRESS    REPORT    ISSUED    TO    DEPARTMENTS 

OR  FACTORIES 

representatives  sent  out  to  secure  info rniat ion  regard- 
ing the  progress  of  manufacturing  and  shipping. 

When  purchasing  is  done  in  a  central  office  for  a 
number  of  factories,  the  lattm-  must  be  advised  of  the 
promises  secured  and  the  progress  made  in  obtaining 
shipments.  The  factories  must  not  be  left  in  total 
ignorance  regarding  their  raw  material.  When  they 
have  themselves  stipulated  the  date  of  delivery,  and 
the  material  is  moving  along  to  them  on  a  pre-ar- 
ranged time  schedule,  it  is  not  necessary  for  the  pur- 
chasing department  to  report  that  the  schedule  time 
is  being  kept.  But  in  every  case  of  delay,  and  when 
the  schedule  is  departed  from  without  piior  instruc- 
tions from  the  factory,  then  the  factory  must  be  kept 
advised  of  all  changes  and  developments.  A  fonn 
for  this  purpose  is  illustrated  in  Figure  56. 

Assuming  that  delivery  has  been  effected  in  accord- 


ance with  the  contract,  still  the  goods  may  be  sev- 
eral hundred  miles  from  their  ultimate  destination. 
As  I  have  explained  in  previous  chapters,  the  shipper 
has  no  responsibility  after  he  has  delivered  the  ma- 
terial to  the  transportation  company  at  the  point 
designated  in  the  contract.  It  is  important,  therefore, 
to  keep  informed  concerning  the  various  shipments 
that  may  be  en  route.  This  is  the  duty  of  the  traffic 
clerk,  who  must  follow  up  the  shipments  and  get  the 
transportation  companies  to  send  out  tracers  when 
necessary.  If  local  purchases  are  made  f.  o.  b.  the 
seller's  store,  arrangements  must  be  entered  into  with 
trucking  concerns  for  delivery.  This  must  be  done 
in  regard  to  incoming  freight  on  the  railroads  before 
all  questions  of  delivery  can  be  considered  as  finally 
settled. 


ROUTINE  OF  PURCHASING 


279 


CHAPTER  XIV 

FINAL  KOUTINE  WORK  OF  THE  PURCHASING 

DEPARTMENT 

Invoices.— There  is  great  variation  in  the  methods 
employed  by  industrial  establishments  in  dealing  with 
the  routine  work  connected  with  invoices.  This  vari- 
ation is  frequently  caused  l)y  the  difference  between 
the  systems  used  by  the  accounting  and  financial  de- 
partments, with  which  this  section  of  the  purchas- 
ing department  naturally  is  closely  allied. 

Any  attempt  to  discuss  all  these  variations  would 
involve  dipping  deeply  into  the  variations  in  account- 
ing and  financial  methods,  which  I  cannot  do  in  the 
present  treatment.  I  do  propose,  however  to  cover 
the  salient  points,  in  order  that  the  reader  may  be 
enabled  to  understand  fully  the  functions  of  an  in- 
voice and  the  nature  of  the  routine  work  involved 
in  putting  that  invoice  into  proper  shape  for  pay- 
ment, thereby  completing  the  purchasing  cycle. 

It  will  have  been  noticed,  from  the  description  of 
routine  work  already  given,  that  prior  to  the  moment 
at  which  an  order  is  issued,  practically  all  the  work 
of  the  department  is  based  on  the  recjuisition,  but 
that  just  as  soon  as  an  order  is  issued,  all  routine 
work  is  based  on  the  order.  In  the  processes  de- 
scribed in  the  last  chapter,  the  copy  of  the  order  had 
been  carried  to  the  point  where  delivery  had  been 

278 


secured.  .It  should  next  be  passed  along  to  the  in- 
voice department.  This  scheme  enables  the  invoice 
clerk  to  have  always  at  hand  copies  of  all  orders 
on  which  invoices  have  not  been  received.  If,  as 
previously  stated,  copies  are  not  kept  segregated  in 
this  manner,  and  if  it  should  be  necessary  to  search 
through  the  general  order  file  to  ascertain  what  in- 
voices were  not  received,  an  enormous  amount  of 
work  would  be  involved,  for  some  purchasing  de- 
partments issue  several  hundred  orders  each  day. 
When  one  realizes  that  invoices,  under  the  best  con- 
ditions, cannot  come  in  for  a  day  or  two,  that  the 
majority  of  them  do  not  come  for  a  week  or  two, 
and  that  some  are  delayed  even  for  months,  he  will 
appreciate  what  a  search  through  the  file  would  be. 

Sellers  should  be  followed  up  for  invoices  covering 
material  delivered  but  not  billed,  since  a  bill  that  is 
received  several  weeks  or  months  after  material  is 
delivered  is  certainly  more  difficult  to  check  than  one 
which  is  received  at  approximately  the  same  time  the 
material  is  received.  It  is  essential,  also,  to  the 
proper  operation  of  the  cost-keeping  and  financial  de- 
partments, to  obtain  receipt  of  invoices  promptly. 
The  responsibility  for  getting  these  lies,  clearly,  with 
the  purchasing  department.  While  it  will  be  found 
neither  necessary  nor  advisable  to  employ  an  extens- 
ive system  in  following  up  orders  for  invoices,  still 
they  should  be  gone  over  systematically  at  regular 
intervals,  and  delinquents  should  be  notified.  Not 
much  difficulty  will  be  experienced  in  this  respect, 
but  some  invoices  will  fail  to  arrive  unless  inquiry 
is  made  in  regard  to  them. 


280 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


281 


Methods  of  Recording. — In  the  first  paragraph  of 
this  chapter  I  referred  to  the  variation  in  the  methods 
of  proceeding  with  the  routine  work  connected  with 
invoices.  The  first  point  of  contention  is  expressed 
in  these  questions:  Should  a  complete  record  be  kept 
of  all  invoices  as  they  are  received?  And  if  one  is 
kept,  on  whom  should  rest  the  responsibility  of  doing 
the  work!  Some  purchasing  departments  have  in- 
augurated such  a  scheme,  and  later  abandoned  it  as 
unnecessary.  Other  departments  have  transferred  the 
work  to  the  accounting  department.  In  still  other 
cases,  conditions  have  been  reversed,  and  the  work 
of  recording  has  been  relinquished  by  the  account- 
ing department  and  taken  up  by  the  puichasing  de- 
partment. 

The  answer  to  the  first  question  is  that  a  record 
should  by  all  means  be  kept,  since  it  is  essential  to 
right  buying.  Invoices  have  a  peculiar  tendency  to 
get  lost  or  go  astray,  particularly  if  they  are  passed 
around  from  one  department  to  another.  A  seller 
will  call  up  on  the  telephone,  or  write,  asking  why 
some  invoice  has  not  been  paid,  and  the  answer  may 
be  given  that  it  cannot  be  found.  Let  this  occur  with 
the  same  concern  twice,  and  the  standing  and  rating 
of  that  purchasing  department  goes  down  the  scale 
rapidly  in  the  eyes  of  the  seller.  It  has  been  empha- 
sized repeatedly  that  the  higher  the  standard  of  pur- 
chasing is  maintained,  the  greater  is  its  potentiality 
for  successful  operation.  Every  seller  is  attracted  by 
good  buying,  which  includes^  unfailing  promptness  in 
handling  invoices  and  regularity  in  paying  them. 
This  attraction  of  sellers  draws  bargains  to  the  pur- 


chasing agent's  desk,  secures  priority,  and  obtains 
preferences. 

The  answer  to  the  second  question  depends  mainly 
on  the  organization  of  the  establishment  and  the 
location  of  the  departments.  Some  large  purchasing 
departments  are  arranged  so  that  they  are  adjacent 
to  the  accounting  departments,  the  invoice  clerks  in 
one  being  in  close  touch  with  those  of  the  other.  It 
is  then  immaterial  which  department  keeps  the  rec- 
ord. Some  executives  insist  on  all  invoices  going  first 
to  the  accounting  department  in  order  that  it  may  be 
able  to  compile  figures  regarding  the  obligations  for 
which  the  financial  department  must  make  provision 
and  arrange  the  information  concerning  the  dates.  In 
the  absence  of  counterbalancing  considerations,  for 
the  reasons  stated  in  the  last  paragraph,  and  also  be- 
cause until  invoices  are  finally  approved  they  are 
documents  of  tangible  importance  to  the  completion 
of  the  purchasing  cycle — it  may  be  generally  con- 
ceded that  they  should  go  first  to  the  purchasing  de- 
partment and,  if  possible,  remain  in  the  department 
until  approval  is  completed. 

An  example  is  given  in  Figure  57  of  a  form  for  re- 
cording invoices.  This  needs  little  explanation,  as 
the  headings  of  the  various  columns  make  obvious 
the  purpose  of  each.  To  secure  ready  identification, 
all  invoices  should  be  numbered  seriatim  as  they  ar- 
rive in  the  department.  This  record  gives  the  date 
on  which  invoices  are  received,  as  well  as  that  on 
which  they  are  finally  passed.  If  they  should  be  sent 
out  of  the  department  for  any  reason,  a  record  of  this 
fact,  with  an  explanation,  is  also  kept. 


!*",■ 


282 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


283 


INVOICF  RFCORD                                                                             Date  _ 

Date 

fin* 

Invoice 
No. 

Amount 

Sent  out  of  Dep't. 

Date 

Returned 

Final 
Approval 

For  Cash 
Discount 

For  other 
Reasons 

• 

FIG.   57.      FORM  FOR  RECORDING  INVOICI<:S 

If  an  invoice,  for  any  reason,  must  be  sent  out  of  the  purcliasing 
department,  the  fact  should  be  noted  on  tliis  r»?cord 

Preliminary  Work. — After  the  invoice  has  been  re- 
corded, the  next  thing  to  do  is  to  scrutinize  the  date 
when  payment  must  be  made  to  secure  the  cash  dis- 
count. It  is  essential  to  ado])t  some  effective  method 
of  keeping  this  date  prominently  before  all  persons 
who  have  anything  to  do  with  the  invoice.  Space 
must  be  allowed  for  certifying  purposes;  it  frequently 
happens  that  an  invoice  is  so  crowded  with  printed 
or  written  text  that  no  open  space  is  left.  In  some 
cases  the  method  of  pasting  a  slip  on  the  invoice  is 
resorted  to;  in  other  cases  this  has  been  abandoned, 
and  a  rubber  stamp  is  used.  Both  schemes  are  open 
to  objection,  but  the  preference  should  be  given  to  th(^ 
latter.  The  main  objection  to  this  is  that,  owing  to 
the  lack  of  space  on  the  front,  the  improHsion  must 
frequently  be  stamped  on  the  back,  and  then  it  is 
necessary  to  turn  the  invoice  over  to  verify  the  certi- 
fications.   This  drawback,  however,  is  less  of  an  ob- 


jection than  to  have  an  additional  sheet  attached  to 
the  invoice.  Figure  58  indicates  a  good  form  of  im- 
pression to  use;  this  may  be  stamped  on  the  invoices 
by  the  clerk  who  makes  the  record  of  them. 

Checking  Invoice  With  Order. — The  next  step  in 
connection  with  the  invoice  is  to  check  it  with  the 
order.  This  is  the  logical  order  of  procedure,  but  it 
IS  permissible  to  change  this  routine  somewhat,  ac- 
cording to  circumstances.    It  is  better  to  check  with 


FORM  549 


DISCOUNT 


EXPIRES 


FIG.   58.      RUBBER  STAMP  FOR  INVOICES  TO  DRAW 
ATTENTION   TO   CASH   DISCOUNT 

the  order  first,  because,  if  quantity  or  price  were 
found  to  be  incorrect,  there  would  be  no  object  in 
checking  the  extensions.  The  check  against  the 
order  is  the  main  safeguard  against  paying  an  in- 
voice twice.  Figure  53  illustrates  the  reverse  side  of 
the  copy  of  the  order  kept  in  the  purchasing  depart- 
ment. Every  invoice  must  be  entered;  it  is  enough 
to  give  simply  the  date  and  the  amount.  It  can  be 
readily  seen  that  a  second  invoice  for  the  same  date 
and  amount  ought  never  to  be  approved,  but  this 
mistake  sometimes  occurs,  for  human  nature  is  never 
infallible. 


'  »• 


284 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


285 


It  will  be  noticed  that  the  record  on  the  back  of 
the  copy  of  the  order  is  arranged  for  notes  on  th(» 
follow-up  procedure,  so  that  a  very  complete  history 
can  be  kept  on  this  document  with  tho  minimum 
amount  of  work.  A  point  which  must  not  be  over- 
looked is  that  the  requisition  number  appears  on  the 
order,  the  order  number  is  on  the  requisition,  and  th(? 
invoice  number  is  on  the  order.  Consequently,  the 
controlling  papers  connected  with  any  order  can  be 
obtained  at  any  moment  with  the  least  possible 
amount  of  trouble. 

In  the  checking  of  the  invoice  againsi  the  order, 
there  are  some  other  features  which  must  be  watched. 
It  must  be  seen  that  the  description,  grade,  and  so 
on,  correspond.  If  the  material  is  subject  to  inspec- 
tion before  delivery,  the  inspector's  reports  must  be 
secured  and  examined  to  see  whether  the  material  has 
passed  satisfactorily  the  requisite  tests.  When  the 
invoice  has  been  completely  checked  Avith  the  order, 
a  distinctive  check  mark  should  be  placed  upon  it  to 
show  that  the  process  has  been  completed. 

Checking  Invoice  with  Material  Received.— This  is 
another  feature  in  which  gi-eat  variation  exists.  In 
existing  practice,  the  receiving  department  sometimes 
reports  to  the  accounting  department  and  sometimes 
to  the  purchasing  department.  It  would  be  impos- 
sible to  discuss  intelligently  and  to  the  point,  within 
a  limited  space,  the  many  contingencies  that  might 
arise  from  the  adoption  of  (me  or  another  of  these 
methods.  The  purchasing  department  should  cer- 
tainly be  informed  of  the  safe  arrival  of  the  material 
before  finally  approving  an  invoice.     I  shall  outline 


here  three  simple  schemes,  any  one  of  which  may  be 
used  to  that  end. 

1.  The  receiving  department  can  make  a  complete 
record  of  all  incoming  material  on  loose-leaf  sheets  in 
triplicate,  as  shown  in  Figure  59.  Either  small, 
separate  sheets — which  would  correspond  with  each 
invoice — or  large  sheets,  can  be  used.  If  individual 
sheets  are  used,  one  copy  can  go  to  the  purchasing 
department,  one  can  follow  the  material  to  the  de- 
partment which  requisitioned  it,  and  the  third  can  re- 
main as  a  permanent  record  with  the  receiving  clerk. 
This  distribution  cannot  be  made  if  a  large  number 
of  items  are  placed  on  one  sheet  and  rewriting  is 
necessary.  , 

2.  As  illustrated  in  the  form  * '  C  "  shown  in  Figure 
38,  a  copy  of  the  original  purchase  requisition  can 
be  returned  to  the  receiving  clerk,  who  fills  in  the 
information  and  returns  it  to  the  purchasing  depart- 
ment, where  it  can  be  checked  with  the  invoice  and, 
if  desired,  attached  to  it.  The  latter  feature  is  in- 
sisted upon  by  some  auditors.  The  disadvantage  of 
this  method  is  that  in  ordering  the  material,  the 
requisition  may  undergo  changes  which  would  neces- 
sitate altering  that  document,  and  the  receiving  clerk 
must  make  an  independent  record  for  other  purposes. 
This  procedure  entails  additional  work. 

3.  A  copy  of  the  order,  as  illustrated  in  Figure  60, 
can  be  sent  to  the  receiving  clerk.  On  this  the  re- 
ceipt of  material  can  be  recorded,  and  the  document 
can  be  returned  to  the  purchasing  department  to 
serve  the  same  purpose  as  the  copy  of  the  requisi- 
tion,  named   in   the   last   paragraph.     This    scheme 


286 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


287 


I 


NAME. 


ADDRESS. 


Date 


Quantity 


Unit 


FO.I 


Freight  Charges 


Description  of  Matenal 


Received  on  account  of  Order  No. 


Receiving  Clerk 


Inspection  Report. 


Signed. 


Inspeclof 


Signed. 


Material  received  into  Stores 


Storekeeper 


Attached  to  Invoice  No. 


Signed . 


Invoice  Clerk 


FIG.    59.      RECEIVING   CLERK *S  RECORD   OF   RECEIPT   OF   MATERIAL 

One  copy  ultimately  goes  to  the  purchasingMepartment  and  a  second 
copy  follows  the  material  to  the  inspector  and  subsequently  to  the 
storeroom.  The  upper  half  can  be  in  (juadruplicate,  if  desired,  so  that 
the  receiving  clerk  can  retain  one  and  forward  another  to  the  pur- 
chasing department  as  a  prompt  notice  of  the  arrival  of  goods 


NOTICE:  A  detailed  report  of  the  goods  mentioned  on  the  opposite  side  of  this  sheet 
must  be  made  in  the  space  below.    Partial  receipts  should  be  reported  on  Form  423- 


Date 


How 
Delv'd. 


Quantity 


ToW 

i  Point! 


Freight 


Charged  to 


Class 


Amount 


Received  by. 
Approved 


Approval  mtrst  be  by  Mgr.  or  Supt.  or  one  duly  authorized. 


FIG.    60.      RECORD  OF   RECEIPT   OF    MATERIAX.    (REVERSE  SIDE 

OF  COPY  OF  order) 

suffers  from  some  of  the  drawbacks  just  mentioned, 
in  that  it  is  necessary  for  the  deceiving  clerk  to  com- 
pile a  record  of  receipts  independently  of  that  made 
on  the  copy  of  the  order.  In  either  case,  all  the  ma- 
terial requisitioned  or  ordered  might  not  be  de- 
livered at  one  time,  and  in  that  event  extra  or  supple- 
mentary forms  of  some  kind  would  have  to  be  used 
for  the  recording  of  part  shipments. 

It  would  seem  that  the  first  scheme  outlined  com- 
bines all  the  elements  of  simplicity,  safety,  and  effi- 
cacy— certainly,  from  a  strictly  purchasing  point  of 
view  it  covers  everything  essential — but  it  is  not 
always  possible  to  evade  the  rules  and  regulations 
laid  down  by  auditors,  for  which,  from  their  stand- 


H 


:      j^ 


288 


PURCHASING  AND  STORING 


ROUTINE  OF  PURCHASING 


289 


point,  there  are  good  and  sufficient  reasons.  For  ex- 
ample, in  some  establishments  all  invoices  must  bear 
the  signature  of  the  party  actually  receiving  the 
goods,  a  rule  which  necessitates  sending  the  invoices 
out  of  the  purchasing  department  for  this  purpose, 
and  getting  them  back  again. 

In  all  the  instances  cited,  there  is  another  object 
besides  the  securing  of  an  acknowledgment  upon 
the  receipt  of  the  material:  namely,  the  sure  pre- 
vention of  duplication  of  payments.  It  is  self-evi- 
dent that  the  receiving  clerk's  receipt — whether  it 
is  on  a  special  receiving  slip,  on  a  copy  of  the  requi- 
sition, or  on  a  copy  of  the  order — cannot  be  at- 
tached to  two  separate  invoices.  ^Even  if,  in  any 
individual  case,  it  is  not  the  custom  to  attach  these 
documents  to  invoices,  the  protection  should  still  be 
positive,  because  the  receiving  slip  should  be  can- 
celed in  some  definite  way  as  soon  as  it  is  checked 
with  the  invoice.  In  the  discussion  of  stores  prob- 
lems I  shall  be  obliged  to  refer  again  to  the  receiv- 
ing department,  but  what  I  have  already  said  is 
sufficient,  so  far  as  the  strictly  purchasing  essentials 
are  concerned. 

Checking  Prices. — ^In  the  case  of  many  orders  no 
price  appears,  or  perhaps  a  discount  is  quoted  apply- 
ing on  the  standard  price  list,  or  simply  a  base  price 
is  quoted.  This  matter  was  covered  in  Chapter  VII, 
and  illustrations  were  given  which  showed  conve- 
nient ways  of  keeping  these  records  and  price  lists. 
An  invoice  clerk  is  constantly  in  need  of  this  infor- 
mation, and  he  will  find  that  a  loose-leaf  system,  as 
described  in  Chapter  VII,  is  invaluable.     It  is  im- 


possible to  dispense  with  it  in  any  department  that 
checks  invoices  for  more  than  a  few  kinds  of  ma- 
terials and  supplies.  Incorporated  with  this  price 
record  there  should  be,  in  an  abbreviated  form,  the 
particulars  of  each  contract  in  force.  These  memo- 
randa transcribed  from  the  contracts  should  be  suf- 
ficient to  enable  the  clerk  to  check  the  invoice  with- 
out reference  to  the  contract  itself. 

Classifying    and    Checking    Extensions.— Both    of 
these  features  should  be  taken  care  of  in  the  pur- 
chasing  department.     That   department,   since  it   is 
more  familiar  with  materials,  and  since   it  has  the 
original  requisition  designating  the  classification,  is 
in  a  better  position  than  the  accounting  department 
to  do  this  work.     Likewise,  in  connection  with  the 
extensions,  there  is  need  for  a  man  familiar  with 
trade   discounts    and    some    trade    customs,    for   fre- 
quently the  unit  prices  are  inserted  on  invoices  with- 
out any  indication  as  to  whether  the  unit  is  a  dozen, 
a  gross,  a  hundred,  or  a  pound.     Only  familiarity 
with  trade  usages  and  customs  will  enable  a  person 
to   make    the   proper   distinctions.     Experience    has 
proved  that  the  checking   of  extensions   cannot   be 
slurred;  therefore  work  of  this  kind  should  be  as- 
signed to  a  man  who  has  the  necessary  qualifications. 
Checking    Freight    Charges. — On    the    invoice    of 
every  article  which  is  received  at  destination,  and  an 
which  a  charge  for  freight  or  delivery  is  paid,  this 
charge  should  appear,  in  order  that  it  may  be  prop- 
erly classified.    The  allocation  of  freight  charges  to 
general  expense  is  a  loose  and   inadequate  method. 
The  freight  charges  on  some  materials  are  equivalent 


i 


290 


PURCHASING  AND  STORING 


RECEIVED 


QUANTITY 


PRICE 


JOB  No. 


F.  0.  B. 


FREIGHt 


EXTENSIONS 


CHARGE  TO 


CLASS 


FORM  941 

APPROVED 


AMOUNT 


mm^ 


PIG.  62.      RUBBER  STAMP  FOR  APPROVING  INVOICES 

Each  of  the  spaces  should  be  utilized  for  the  purpose  indicated  before 
the  invoice  is  finally  sent  out  of  the  department  for  payment 

to  25  per  cent  or  more  of  the  invoice  price,  and  if 
these  charges  did  not  appear  under  the  same  classi- 
fication as  the  invoice,  there  would  be  serious  dis- 
crepancies in  costs  accounting.  It  is  for  this  reason 
that,  in  the  verification  of  an  invoice,  the  delivery 
point  must  be  indicated  and  the  amount  of  the  trans- 
portation charges  must  be  inserted.  (See  Figure  62.) 
Another  reason  why  these  particulars  should  ap- 
pear on  the  verification  of  the  invoice  is  that  the 
f.o.b.  point  specified  on  the  order  must  be  checked 
with  the  delivery  actually  made  by  the  shipper.  When 
these  do  not  harmonize,  the  necessary  adjustment 
must  be  made  with  the  seller.  The  receiving  clerk 
should  always  specify  on  his  reports  the  transporta- 
tion charges  on  incoming  material.     The  accuracy  of 


ROUTINE  OF  PURCHASING 


291 


these  charges  can  be  checked  by  a  member  of  the 
purchasing  department,  or,  if  the  establishment  main- 
tains a  traffic  department,  it  may  be  done  by  that  de- 
partment. 

Final  Approval.— The  signature  that  determines  the 
final  approval  of  the  invoice  converts  it  into  a  docu- 
ment of  tangible  value.  Naturally  the  signature 
should  be  that  of  some  person  in  authority  who  is 
thoroughly  familiar  with  the  various  checking  pro- 
cesses, and  who  would  be  able,  without  too  close  an  ex- 
amination, to  detect  any  glaring  mistake  in  them.  If 
the  final  approval  is  given  in  an  entirely  perfunctory 
manner,  it  might  just  as  well  be  pronounced  by  the 
office  boy  as  by  anyone  else.  The  exit  of  all  invoices 
from  the  purchasing  department  should  be  recorded 
on  the  form  shown  in  Figure  57. 

Securing  Cash  Discounts.— Throughout  the  discus- 
sion concerning  the  checking  of  invoices,  I  have  as- 
sumed that  the  checking  is  done  to  permit  the  invoice 
to  reach  the  financial  department  in  time  for  the 
latter  to  make  the  payment  minus  the  cash  discount. 
If  the  verification  of  the  invoice  cannot  be  completed 
in  time  for  the  cash  discount  to  be  secured,  it  should 
be  sent  to  the  financial  department  with  a  request 
that  It  be  returned,  after  payment  has  been  made,  to 
the  purchasing  department  for  completion  of  the  ap- 
proval process.  When  invoices  are  sent  out  of  the 
department,  for  this  or  any  other  purpose,  the  fact 

should  be  noted  on  the  invoice  record.     (See  Fio-nre 
57.)  ^ 

The  regulations  of  most  auditing  and  financial  de- 
partments will  not  permit  of  the  payment  without 


292 


PURCHASING  AND  STORINCJ 


ROUTINE  OF  PURCHASING 


293 


final  approval;  in  such  cases,  of  course,  this  will  have 
to  be  given.  Whether  or  not  it  is  given  is  not  a  mat- 
ter of  importance  to  the  purchasing  department,  be- 
cause, if  any  adjustment  should  be  necessary  on 
account  of  errors  subsequently  discovered,  approval 
would  have  to  be  secured  after  payment  was  made, 
whether  or  not  the  department  had  approved  the  in- 
voice. If,  however,  business  is  being  done  with  r(»- 
liable  concerns,  no  difficulty  should  be  experienced 
on  this  score.  I  have  emphasized  this  point  in  prc^ 
vious  chapters.  The  purchasing  department  is  chiefly 
concerned  in  getting  the  invoices  back  in  order  that 
the  verification  may  be  completed.  If  it  cannot  get 
them,  it  will  have  to  make  cojnes. 

Securing  Credits. — It  has  been  estimated  by  some 
business  men  that  ^Ye  per  cent  of  all  invoices  are  in- 
correct in  some  particular.  This  is  an  exaggeration 
if  applied  solely  to  some  vital  factor  of  the  invoice 
which  would  change  its  total  in  dollars  and  cents. 
Minor  features,  such  as  dates,  order  numbers,  and 
so  on,  are  more  frequently  incorrect,  but  inaccuracy 
with  respect  to  these,  while  annoying,  is  not  so  ser- 
ious. Throughout  the  discussion  of  the  whole  pur- 
chasing subject,  I  have  emphasized  the  importance  of 
selecting  sellers  who  use  ))usiness  methods  of  ap- 
proved standards.  Dealing  with  such  concerns  re- 
duces all  form  of  friction  and,  to  a  great  extent,  the 
probability  of  error,  even  in  invoices,  but  mistakes 
will  occur,  and  the  purchasing  department  must  make 
provision  for  them. 

The  manner  in  which  the  jiroblem  is  dealt  with  by 
different  concerns  varies  greatly,  and  many  of  the 


methods  used  entail  an  indefinite  delay  in  the  ap- 
proval of  the  invoice.  A  plan  that  often  brings  quick 
results  is  to  return  the  invoice  to  the  vendor,  using  a 
printed  form  which  calls  his  attention  to  its  inac- 
curacy. And  yet  this  scheme,  although  widely  used, 
has  many  drawbacks.  It  is  sometimes  difficult  to  get 
some  of  the  invoices  back.  If  they  are  subject  to 
cash  discount,  this  discount  may  be  lost,  or  a  contro- 
versy may  arise  in  connection  with  it.  If  the  check- 
ing process  had  been  partly  done,  it  would  be  neces 
sary  to  cancel  these  checks  and  take  the  stand  that 
no  invoice  had  been  received. 

Requesting  credits  from  sellers  and  holding  in- 
voices in  the  purchasing  department  until  they  are 
received,  is  also  a  very  unsatisfactory  method,  for  all 
of  the  reasons  stated,  and  many  more. 

This  is  a  big  problem  in  large  purchasing  depart- 
ments and  it  should  be  looked  at  in  a  broad  light. 
Special  care  is  necessary  because  the  problem  arises 
from  comparatively  small  and  petty  matters  which 
may  become  of  considerable  import  if  not  taken  in 
hand  and  disposed  of  daily. 

The  logical  method  is  to  debit  the  seller  with  the 
discrepancies,  and  then  pass  the  invoice  along  to  the 
financial  department  for  payment.  The  adoption  of 
this  scheme  absolutely  prevents  any  accumulation  of 
invoices  in  the  purchasing  department;  it  permits  the 
cost  department  to  proceed  with  their  work  without 
delay,  and  insures  prompt  payment  of  all  invoices; 
it  also  makes  a  clean-cut  issue  between  the  buyer  and 
the  seller,  and  defines  the  position  of  the  former  ac- 
curately and  positively. 


2M 


PURCHASING  AND  STORING 


The  only  element  of  uncertainty  in  this  method  of 
procedure  is  in  connection  with  the  seller's  accept- 
ance of  the  buyer's  debit.  For  this  reason,  it  is  im- 
perative that  no  debit  be  made  unless  the  evidence 
of  its  correctness  is  convincing  and  unmistakabh*. 
When  there  is  an  element  of  doubt  the  matter  can  be 
taken  up  first  with  the  seller,  and  an  understanding 
can  be  reached  before  any  definite  amount  is  debited. 
The  cases  which  involve  uncertainty  are,  however,  so 
few  that  they  do  not  occasion  any  serious  disturbance 
or  dislocation  of  the  regular  operation  of  the  routine 
work. 

There  are  two  forms  that  can  be  used  for  making 


Debit  Note  No. 
Charge  to_ 


Applying  on  Invoice  No 


Address. 


Quantity 


Material 


Amount 


Reason  fof  Debit 


FIG.   63.      DEBIT  NOTE  APPLYINCJ   ON   INCORRECT  INVOICES 

This  form  should  be  made  out  in  the  purchasing  department  whith 
will  then  render  a  formal  debit   memorandum  to  the  seller 


ROUTINE  OF  PURCHASING 


295 


JOHN  SMITH  MFG.  CO. 

too  SIXTEENTH  AVE. 
NEW  YORK 


DEBIT  MEMO.  NO. 


Date. 


TO. 


We  have  debited  your  account  as  stated  below: 


Your  Invoice 


Date 


Amount 


Reason  for  Debit 


Amount 
of  Debit 


FIG.  64.      DEBIT  INVOICE 

If  the  regulations  of  the  establishment  permit,  the  purchasing  de- 
partment may  use  this  form  to  send  debit  invoices  directly  to  the 
seller.  The  form  is  in  triplicate;  the  original  is  sent  to  the  seller, 
one  copy  is  attached  to  the  invoice,  and  the  third  remaining  in  the 

purchasing  department 

debits  applying  on  invoices.  The  first  one,  as  illus- 
trated in  Figure  63,  is  made  out  in  duplicate  in  the 
purchasing  department.  The  duplicate  is  retained  in 
that  department;  the  original  is  attached  to  the  in- 
voice and  accompanies  it  to  the  accounting  depart- 
ment, where  a  formal  debit  invoice  is  made  up  from 
it  and  mailed  to  the  seller.  This  method  requires 
some  duplication  of  work,  because  full  details  of  the 
debit  must  be  written  up  in  the  purchasing  depart- 


296 


PURCHASING  AND  STORING 


ment,  and  subsequently  have  to  be  copied  by  the  ac- 
counting  department.  There  is  no  getting  away  from 
this  feature,  however,  in  those  establishments  which 
absolutely  prohibit  the  making  of  debits  or  credits 
by  any  except  the  financial  or  accounting  departments. 

If  the  condition  just  mentioned  is  not  enforced,  a 
form  such  as  that  illustrated  in  Figure  64  can  be 
used.  This  can  be  made  in  triplicate — the  original 
will  be  sent  to  the  seller,  the  duplicate  will  be  at- 
tached to  the  invoice,  and  the  triplicate  will  be  re- 
tained in  the  purchasing  department.  The  advantage 
of  this  method  is  that  it  is  not  necessary  to  rewrite  in 
some  other  department  the  particulars  of  the  debit. 

When  either  of  these  forms  is  used,  full,  complete, 
and  explicit  details  of  the  charge  against  the  seller 
must  be  given.  They  must  be  such  as  will  enable  the 
seller  to  see  clearly  the  accuracy  of  the  debit  and  the 
reason  for  making  it.  The  debits  should  be  numbered 
in  sequence  in  the  purchasing  department,  and  these 
numbers  should  appear  on  the  copy  of  the  order  and 
also  on  the  seller's  invoice  in  the  space  allotted  for 
the  approval.  If  the  plan  outlined  above  is  closely 
followed,  the  most  disagreeable  feature  in  connection 
with  checking  invoices  can  be  handled  without  diffi- 
culty and  disposed  of  in  a  systematic,  businesslike 
manner.  The  purchasing  department's  files  are  ke])t 
clear,  the  cost  department  has  prompt  information  as 
to  the  actual  cost  of  materials,  the  accounting  depart- 
ment has  no  unbalanced  accounts  with  creditors,  and 
the  financial  department  can  make  payments  i)rompt- 
ly,  taking  advantage  of  all  cash  discounts. 


CHAPTER  XV 

PUKCHASING  PROBLEMS  AND  THEIR 

SETTLEMENT 

How  Problems  Arise. — Mistakes  are  made  in  pur- 
chasing as  in  every  other  department  of  business. 
These  can  be  rectified,  and  if  either  party  has  sus- 
tained a  loss,  an  adjustment  can  usually  be  effected 
on  an  equitable  basis,  provided  the  party  that  made 
the  mistake  is  willing  to  admit  the  error.  Misunder- 
standings are  sometimes  more  difficult  to  adjust,  be- 
cause each  party  may  honestly  think  that  his  version 
is  the  correct  one.  I  have  emphasized,  throughout 
the  discussion  of  purchasing,  that  it  is  always  im- 
portant to  bring  into  agreement  the  minds  of  the  two 
parties  to  the  transaction,  and  that  when  this  ''meet- 
ing of  minds"  is  an  accomplished  fact,  there  should 
be  documentary  evidence  to  show  for  it. 

Buyers  and  sellers  do  not  appeal  to  courts  of  law  to 
settle  disputes  that  involve  only  trivial  amounts.  They 
do  not  do  so,  in  many  cases,  even  when  the  amounts 
involved  are  very  large,  and  each  party  honestly  feels 
that  the  true  version  of  the  case  is  his  own  exposition 
of  it.  The  problems  that  actually  arise  for  settle- 
ment are  multitudinous.  The  records  of  the  courts 
have  been  crowded  with  them  ever  since  the  time 
that  such  records  were  first  kept. 

The  problems  cited  in  the  following  pages  are  a 

297 


298 


PURCHASING  AND  STORING 


PROBLEMS  AND  SETTLEMENT 


299 


few  of  the  simplest  ones.  The  opinions  expressed  are 
not  legal— they  either  are  based  on  my  own  practical 
experience,  or  have  been  furnished  by  reliable  author- 
ities. They  have  this  value,  that  they  may  be  used 
to  strengthen  the  arguments  of  any  one  who  en- 
deavors to  adjust  a  misunderstanding. 

Patterns  and  Dies— Few,  if  any,  questions  arise 
concerning  patterns.  If  a  pattern  is  furnished  by  the 
buyer,  or  if  it  is  made  for  him  by  the  founder,  it  is 
paid  for  by  the  former  and  is  recognized  as  his  prop- 
erty.  The  disposition  to  be  made  of  it  depends  upon 
his  instructions.  Why  should  dies  be  treated  differ- 
ently from  patterns?  Custom  has  probably  decreed 
that  they  should  be.  There  is  no  other  reason,  and 
the  day  is  coming  when  the  question  of  dies  will  be 
treated  in  as  broad  a  manner  as  the  question  of  pat- 
terns. 

If  dies  were  always  at  the  disposition  of  the  pur- 
chaser of  the  forgings,  many  misconceptions  would  be 
eliminated.  A  clear  understanding  should  be  insisted 
upon  by  the  buyer,  in  placing  orders,  as  to  the  owner- 
ship  of  the  die.  If  an  order  is  given  to  a  forge  con- 
cern which  involves  making  new  dies,  a  price  per 
piece  is  frequently  agreed  upon,  which  includes  the 
cost  of  the  die.  In  placing  repeat  orders,  it  is  ex- 
tremely probable  that  the  same  price  will  have  to  be 
paid,  which  means  that  the  buyer  is  paying  again 
for  the  die.  Or  if  this  is  not  literally  true,  at  least 
he  can  do  very  little  towards  combating  the  price  on 
the  second  lot  if  no  arrangement  has  previously  been 
made  regarding  the  dies. 

There  is  always  the  question  of  repairs  to  dies  to 


be  considered,  and  a  forge  concern  with  not  too  fine 
a  sense  of  fairness  can  make  the  cost  of  repairs  what 
it  will.  A  buyer  should  ask  for  a  statement  of  the 
cost  of  dies  separate  from  the  quotation  for  forgings, 
and  it  is  always  well  to  have  a  definite  under- 
standing on  certain  points.  For  example,  the  buyer 
should  know  positively  whether  the  dies  are  subject 
to  his  call,  whether  he  is  to  pay  the  cost  of  repairs, 
or  whether  the  seller  is  to  keep  them  in  repair.  If 
the  forging  manufacturer  keeps  the  dies  in  repair, 
the  buyer  should  know  whether  this  arrangement  will 
prevent  his  claiming  them.  A  definite  settlement  of 
all  these  questions  will  save  much  worry,  and  per- 
haps considerable  expense. 

Purchasing  Agent's  Authority. — A  purchasing  agent 
is  assumed  to  be  empowered  to  purchase  the  require- 
ments of  his  concern.  If,  however,  he  should  have 
private  instructions  not  to  buy  certain  materials,  or 
not  to  purchase  in  excess  of  a  stipulated  amount,  and 
should  act  contrary  to  such  instructions,  his  action 
cannot  be  repudiated  by  his  principals.  The  purchas- 
ing agent  would  apparently  be  acting  within  the 
scope  of  his  authority  as  that  authority  is  understood 
by  the  trade  in  general.  The  private  instructions  he 
had  were  not  supposed  to  be  divulged  to  a  third 
person. 

Responsibility  of  Salesmen. — ^Buyers  should  ac- 
quaint themselves  with  the  responsibility  of  salesmen, 
and  should  have  definite  knowledge  that  the  latter 
are  authorized  by  the  concerns  they  represent  to 
make  offers  and  accept  orders  which  shall  be  binding 
on  their  concerns.    If  the  salesmen  are  not  authorized, 


300 


PURCHASING  AND  STORING 


PROBLEMS  AND  SETTLEMENT 


301 


i 


the  principals  may  repudiate  orders  either  made  or 
accepted  by  them. 

Orders  to  Agents. — Contracts  or  agreements  en- 
tered into  with  agents  are  governed  by  rules  similar 
to  those  made  with  salesmen.  An  ageni,  in  many 
cases,  serves  merely  to  bring  the  two  principals  to- 
gether. For  example,  a  purchasing  agent  might  com- 
plete an  agreement  with  an  agent  to  buy  certain 
material,  and  the  conditions,  when  accepted  by  the 
agent's  principal,  would  complete  the  contract.  If 
subsequently  the  buyer  wished  to  modify  the  contract 
by  increasing  or  decreasing  the  quantity,  and  agreed 
with  the  agent  with  respect  thereto,  and  the  agent 
failed  to  notify  his  principal,  the  buyer  could  not 
enforce  the  modification.  In  some  cases,  however, 
agents  are  appointed  by  the  principals  and  are  clothed 
with  full  authority  to  make  contracts. 

Price  Lists. — Printed  price  lists  sent  to  the  trade 
in  general  are  not  in  the  same  category  as  a  specific 
offer  to  sell.  The  latter  can  be  accepted  by  the  buyer 
upon  the  issue  of  an  acceptance  or  order — then  a  legal 
contract  is  in  force;  but  this  rule  does  not  apply  if  an 
order  is  issued  against  a  general  offer  in  the  shape 
of  a  trade  price-list.  Such  general  offers  are  subject 
to  withdrawal,  revision,  or  change,  without  notice. 

Refusing  to  Sell. — A  manufacturer  or  merchant  is 
not  compelled  to  give  a  reason  for  refusing  to  sell  to 
any  party  who  wishes  to  buy.  There  are  certain 
classes  of  business,  such  as  those  represented  by 
transportation,  theatres,  hotels,  and  so  on,  of  a  semi- 
public  character  which  are  forbidden  by  law  to  dis- 
criminate.    Outside  of  those  that  come  under  these 


regulations,  however,  no  control  is  exercised,  and  it 
is  not  necessary  to  assign  any  reason  for  refusing  to 
sell  to,  or  do  business  with,  a  particular  person  or 

firm. 

Quality.— A  dealer  or  jobber  does  not  warrant  the 
goods  he  sells  unless  he  gives  a  distinct  understand- 
ing to  this  effect;  therefore,  in  all  important  pur- 
chases a  warranty  should  be  secured.  But  on  the 
other  hand,  when  one  buys  direct  from  a  manufac- 
turer, whether  or  not  a  warranty  is  given,  there  is 
always  an  implied  warranty  for  such  goods  as  the 
manufacturer  himself  produces. 

Return  of  Containers. — When  there  is  an  agree- 
ment that  containers  shall  be  returned,  credit  is  usu- 
ally allowed  only  when  they  are  delivered  in  good 
condition  at  the  seller's  address.  If  there  is  no  stipu- 
lation as  to  the  place  of  delivery  of  the  containers, 
the  customary  practice  is  for  the  buyer  to  deliver 
the  containers  to  the  seller,  at  the  point  at  which  the 
contract  originally  called  for  delivery  to  the  buyer. 

Leeway  in  Manufacturing  Quantities. — In  making 
large  quantities  of  small  parts — particularly  some 
screw-machine  products  —  trade  usage  permits  an 
over-run  or  under-run  of  about  ten  per  cent  if  noth- 
ing to  the  contrary  is  specified  in  the  order.  In  all 
those  cases,  therefore,  in  which  it  is  important  to  the 
buyer  that  he  receive  the  exact  quantity  specified,  it 
should  be  expressly  agreed  that  no  leeway  in  respect 
to  quantity  is  allowed  the  seller. 

Solvency  of  Vendors. — Buyers  should  be  advised 
regarding  the  solvency  of  concerns  with  which  they 
place  contracts,  because  a  seller  who  becomes  bank- 


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rupt  is  released  from  fulfilling  the  contracts  that  he 
has  accepted.  A  rising  market  might  involve  the 
buyer  in  very  serious  losses,  but  he  would  be  unable 
to  recover  any  part  of  them  as  damages  against  the 
bankrupt  concern,  even  if  it  should  be  liquidated  and 
pay  all  creditors  in  full. 

Machine  on  Trial. — ^When  a  contract  is  made  for 
the  purchase  of  a  machine,  an  article,  or  any  appar- 
atus, on  the  condition  that  a  test  first  be  made,  a  time 
should  always  be  stipulated  for  the  test.  If  no  time 
is  mentioned,  then  only  a  reasonable  period  can  be 
taken  to  try  out  the  machine.  For  example,  sellers 
will  sometimes  put  machines  out  on  trial  without 
naming  any  definite  period,  and  a  few  days  later  they 
will  telephone  asking  for  a  decision,  stating  that  an 
opportunity  exists  of  placing  the  machine  elsewhere. 
If  a  decision  is  not  given  by  the  buyer,  or  if  he  delays 
returning  the  machine,  he  may  be  compelled  to  pay 
for  it. 

Trial  Period. — When  agreement  is  made  to  pur- 
chase a  machine  or  article  provided  it  proves  satis- 
factory at  the  end  of  a  trial  period,  and  it  should  fail 
to  prove  satisfactory,  the  seller  must  be  formally 
notified  before  the  termination  of  the  trial  period. 
Otherwise  the  buyer  may  be  compelled  to  i)ay  for  it. 
His  acceptance  is  implied  from  the  fact  that  he  re- 
tained possession  of  the  goods  after  the  trial  period 
had  expired. 

Damages  to  an  Article  being  Demonstrated. — A 
person  is  bound  to  use  reasonable  care  in  connection 
with  another's  property  which  may,  for  any  purpose, 
be  entrusted  to  him,  or  which  may  be  temporarily  iu 


his  possession.  If  an  article  left  for  demonstrating 
purposes  is  damaged  as  a  result  of  negligence,  the 
cost  of  repairing  the  damage  will  fall  on  the  party 
in  whose  care  it  was  at  the  time  it  was  injured.  If, 
however,  any  damage  results  from  some  flaw  or  de- 
fect in  the  article,  then  the  owner  is  responsible. 

Cancellation  of  Contract.— If  a  buyer  endeavors  to 
cancel  a  contract,  the  seller  can  naturally  hold  him 
for  damages  for  the  attempted  breach.  The  damages 
would  probably  be  assessed  on  the  basis  of  the  profit 
that  would  have  accrued  to  the  seller  if  the  contract 
had  not  been  suspended.  A  seller  is  not  allowed  to 
continue  work,  or  to  do  anything  which  would  en- 
hance the  damages  a  buyer  might  be  called  upon  to 

pay. 

Contracts  not  Specifying  Quantity.— Many  contracts 
are  made  by  purchasing  agents  for  material  for  such 
quantities  as  may  be  ordered  between  specified  dates. 
Such  a  contract  is  indefinite  as  to  both  time  and.  de- 
livery. It  does  not  obligate  the  buyer  to  buy  at  all; 
and  conversely,  there  is  no  obligation  on  the  other 
party  to  sell — it  is  not,  in  effect,  a  binding  contract. 
If,  however,  a  contract  stipulates  that  the  buyer  will 
place  orders  with  the  seller  for  all,  or  half,  or  part, 
of  his  requirements,  then  it  is  assumed  that  the  seller 
has  acquainted  himself  with  the  buyer's  needs  and 
knows  the  quantities  implied  by  the  terms  '* whole,'* 

half,''  and  *^part." 

Orders  without  Prices. — A  seller  can  charge  only  a 

reasonable"  price  for  goods  concerning  the  price  of 
which  no  previous  agreement  exists.  If  an  exorbitant 
price  is  charged,  it  can  be  contested  by  the  buyer, 


a 


(( 


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but  the  determination  of  a  reasonable  price  is  depend- 
ent upon  circumstances.  A  seller  receives  an  order 
for  rush  delivery,  or  he  furnishes  it  on  the  urgent 
solicitation  of  the  buyer — in  doing  this,  the  seller 
may  incur  unusual  expense,  or  he  may  have  to  pro- 
cure the  goods  at  an  unusual  price.  If  such  is  the 
case,  a  seller  will  generally  inform  a  buyer,  but  a 
buyer's  necessity  may  not  allow  of  this  loss  of  time — 
if  so,  the  fact  must  be  given  consideration. 

Penalty  Clause. — A  penalty  clause  inserted  in  a 
contract  and  merely  designed  as  an  endeavor  to  se- 
cure performance  of  the  contract,  cannot  be  enforced. 
A  penalty  can  be  enforced  only  if  it  is  based  on  the 
measure  of  the  damages  which  may  actually  be  sus- 
tained because  of  a  breach  of  the  contract.  Such  a 
penalty  is  usually  termed  liquidated  damages,  and 
should  represent  the  actual  amount  of  compensation 
to  which  the  injured  party  is  entitled.  This  com- 
pensation would  have  to  be  a  fair  amount;  otherwise 
the  penalty  could  not  be  enforced. 

Accepting  a  Portion  of  Goods  Oflfered.—  An  offer  to 
sell  several  items  of  merchandise  when  a  separatt? 
price  is  named  for  each,  does  not  permit  the  buyer 
to  accept  some  items  and  reject  others,  unless  a  con- 
dition to  this  effect  is  inserted  in  the  offer.  The  whole 
of  the  quantity  offered  must  be  taken,  if  the  contract 
is  to  be  binding.  If  the  buyer  wishes  to  take  one  or 
two  parcels  out  of  a  quantity  offered,  and  signifies 
his  willingness  to  do  so,  this  understanding  consti- 
tutes a  new  offer  and  must  have  the  seller's  accept- 
ance before  it  can  be  considered  that  an  agreement 
has  been  reached. 


False  Statements  in  Negotiations.— If  a  salesman 
secures  an  order  by  assertions  that  are  afterwards 
proved  untrue,  then  the  order  is  obtained  by  fraud. 
If,  for  example,  he  should  claim  that  the  goods  in 
question  are  used  in  certain  named  places,  or  for  cer- 
tain purposes,  and  it  was  subsequently  discovered 
that  these  statements  were  false,  the  goods  may  be 
returned  to  the  seller.  But  the  buyer  must  return  the 
goods  within  a  reasonable  time  after  discovering  the 
fraud— otherwise  the  seller  will  claim  that  the  sale 
was  ratified  by  the  buyer's  neglect. 

Offers  by  Telegraph.— Offers  to  sell  made  through 
the  medium  of  a  telegraph  company  must  be  accepted 
in  a  similar  manner,  if  the  contract  is  to  be  binding, 
unless  the  offer  contains  a  stipulation  regarding  time 
which  would  permit  of  an  acceptance  being  sent  by 

mail. 

Carbon  Copies. — Carbon  copies  will  be  accepted  as 
evidence.  If  a  seller  disputes  the  accuracy  of  a  car- 
bon copy  of  an  order  sent  to  him  by  a  buyer,  the 
seller  must  be  prepared  to  support  his  contention  of 
inaccuracy  by  documentary  evidence,  or  by  the  pro- 
duction of  the  original  order. 

Mistake  in  Contract. — Neither  party  to  a  contract 
is  permitted  to  take  advantage  of  a  mistake  by  the 
other  party,  if  the  mistake  is  palpable  and  obvious. 
For  instance,  a  stenographic  error  resulting  in  the 
insertion  of  a  cipher  that  makes  a  price  read  $100 
instead  of  $10,  would  not  obligate  the  party  respon- 
sible for  the  mistake  to  pay  the  larger  amount,  pro- 
vided the  hundred  dollars  could  be  proved  an  absurd 
price. 


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I 


Crating  and  Packing  Charges.— If  a  contract  is 
silent  on  the  question  of  charges  for  crating  or  box- 
ing, a  buyer  cannot  repudiate  such  charges  if  it  is 
customary  in  the  trade  to  charge  them  to  the  buyer. 
The  charges,  of  course,  must  be  fair  and  reasonable. 
A  buyer  cannot  claim  ignorance  of  trade  practices 
and  customs  as  an  excuse  for  non-payment.  Should 
there  be  no  established  trade  custom,  the  buyer  can- 
not be  compelled  to  pay  for  crating  goods,  if  the 
seller  found  it  necessary  to  crate  them  in  order  to 
place  them  in  a  deliverable  state  at  the  point  of  de- 
livery  agreed  upon. 

DeUvery  Point.— If  no  reference  is  made  in  the 
order  to  the  f.o.b.  point,  the  general  assumption  is 
that  the  seller  has  executed  his  part  of  the  bargain 
by  delivering  the  goods  to  a  common  carrier,  unless 
it  can  be  proved  that  the  universal  trade  custom  is 
contrary  to  this  practice. 

Holding  Back  Delivery.— A  buyer  must  take  de- 
livery as,  and  when,  specified  in  the  contract.  If  he 
instructs  the  seller  to  withhold  delivery  for  a  fixed 
or  indefinite  time,  he  is  virtually  authorizing  him  to 
store  the  goods  for  him,  and  should  they  be  damaged 
the  loss  will  fall  on  the  buyer.  All  the  seller  is  required 
to  do,  is  to  exercise  reasonable  care  in  connection 
with  goods  so  held. 

Shipping  an  Order  in  Part.— If  a  vendor,  on  re- 
receipt  of  an  order,  can  ship  only  part  of  it,  and  does 
so,  the  buyer  is  not  compelled  to  accept  wliat  is  sent. 
The  buyer's  order  was  an  offer  to  buy  the  whole 
quantity,  and  if  it  is  to  form  a  binding  contract  it 
must  be  accepted  and  fulfilled  intact.  ' 


Delivery  Prior  to  Contract  Time.— When  a  contract 
names  a  specific  delivery  date,  the  buyer  cannot  be 
compelled  to  accept  the  material  at  a  premature  date; 
if  the  goods  are  delivered  too  soon,  he  has  the  right 
to  refuse  to  accept  them.  But  if  he  does,  the  seller 
is  not  released  from  his  obligation  to  make  delivery 
at  the  time  originally  agreed  upon. 

Delivery  Point  not  Specified.— If  there  is  no  express 
stipulation  to  the  contrary,  and  if  there  are  no  cir- 
cumstances which  indicate  a  different  intention,  the 
point  of  delivery  is  understood  to  be  the  place  where 
the  goods  are  located  at  the  time  the  order  is  sent  to 
the  seller.  All  orders,  therefore,  should  specify  a  de- 
livery point. 

Delivery  and  Conditions  beyond  Control.— In  those 
contracts  in  which  time  of  delivery  is  an  essential 
feature,  it  is  customary  for  the  seller  to  insert  a 
clause  referring  to  conditions  beyond  his  control,  such 
as  strikes,  fires,  and  so  on.  Should  a  strike  last,  say, 
one  month,  the  seller  could  not  compel  the  buyer  to 
accept  delivery  one  month  later  than  the  stipulated 
time,  neither  could  the  buyer  force  the  seller  to  make 
delivery  at  the  later  date.  If  the  stipulated  time  of 
delivery  is  not  followed,  the  contract  comes  to  an  end. 

Delivered  at  Destination. — If  goods  are  bought 
** Delivered  at  Destination,"  and  the  seller  fails  to 
prepay  the  freight,  which  is  subsequently  paid  by  the 
buyer,  the  seller  is  not  relieved  from  the  responsi- 
bility for  the  goods  until  they  arrive  at  destination. 
If,  however,  it  should  become  necessary  to  present 
a  claim  against  the  transportation  company,  the  buyer 
would  have  to  do  it^  since  he  paid  the  freight. 


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ii  ■> 


l: 


Prompt  Shipment. — What  does  prompt  shipment 
mean?  So  many  orders  are  placed  by  buyers,  and  ac- 
cepted by  sellers,  for  ''prompt  shipment"  that  a  defi- 
nition of  the  term  is  essential,  particularly  in  times 
when  the  market  price  is  advancing.  ''Prompt  ship- 
ment" really  means  that  shipment  must  be  made  with 
reasonable  promptness.  Failure  on  the  seller's  part 
to  live  up  to  this  understanding  entitles  the  buyer  to 
purchase  elsewhere  and  to  claim  as  damages  any 
difference  in  price  he  may  have  to  pay.  If  the  ma- 
terial can  be  readily  purchased  in  the  oi)en  market, 
the  seller  cannot  be  compelled,  by  process  of  law,  to 
make  delivery. 

Transportation  Company's   Obligation  to  Deliver 

Promptly.— Many  questions  have  arisen  regarding  the 
liability  of  a  transportation  company  for  delays  in 
transit,  but  unless  neglect  can  be  proved  no  claim  can 
be  enforced.  At  various  times  traffic  congestion  has 
delayed  deliveries  at  practically  all  points  reached  by 
railroads.  If  the  transportation  company  does  not 
discriminate  against  one  shipper  in  favor  of  another, 
and  if  it  uses  its  facilities  for  the  best  interests  of  all, 
it  cannot  be  held  to  account  for  delays. 
^^  Transportation  Losses.— ^'hen  material  is  bought 
"f.o.b.  shipping  point,"  ownership  is  conveyed  to 
the  buyer  at  that  point.  As  owner  of  the  goods,  the 
buyer  assumes  the  risk  of  loss  or  damage;  in  transit, 
fn  transporting  the  goods,  the  carrier  acts  as  the 
buyer's  agent,  and  any  claim  for  loss  or  damage  must 
be  settled  between  these  two  parties.  The  seller's 
responsibility  ceases  when  he  has  made  a  satisfactory 
delivery  at  the  place  agreed  upon. 


Claim  against  Transportation  Company.— An  in- 
crease or  decrease  in  the  market  value  of  goods  lost 
or  damaged  in  transit,  does  not  affect  the  amount  of 
a  claim,  which  must  be  based  on  the  invoice  price  at 
time  of  delivery  to  the  transportation  company. 

Credit  for  Returned  Goods.— When  goods  are  re- 
turned for  credit,  the  general  assumption  is  that  the 
credit  will  apply  on  the  account  between  the  two 
parties.  But  if  the  buyer  obtains  no  more  goods  from 
the  seller,  then  the  amount  of  the  credit  must  be  paid 
in  cash  within  the  credit  period  recognized  as  stand- 
ard for  such  goods.  It  is  taken  for  granted  that 
there  is  no  agreement  to  take  other  goods  in  exchange 
for  those  returned,  or  to  buy  others  of  a  value  equal 
to  the  credit. 

Freight  on  Defective  Material.  —  Transportation 
charges  on  defective  material  are  an  obligation  of  the 
seller,  irrespective  of  the  delivery  point  named  in  the 
contract.  This  rule  applies  not'  only  to  the  charges 
incurred  on  the  original  journey  of  the  material  to 
the  buyer,  but  also  to  those  incurred  in  its  return  to 
the  seller.  Since  the  material  is  defective,  the  con- 
tract has  not  been  filled  and  no  proper  delivery  has 
really  been  made.  The  buyer,  therefore,  is  under  no 
obligation,  but  it  is  customary  for  him  to  consult  with 
the  seller  concerning  the  return  of  the  material,  and 
to  obtain  instructions  as  to  routing,  and  so  on. 

Liability  of  Railroad  Company. — ^When  a  car  is 
loaded  by  the  shipper  it  is  customary  for  the  railroad 
company  to  stamp  the  bill  of  lading,  "Loaded  by 
shipper.  The  carrier  is  not  accountable  for  weight, 
quantity,  or  condition  of  property."    This  statement 


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311 


does  not  relieve  the  railroad  company  from  its  ordi- 
nary liability  for  the  goods  in  transit,  but  if  it  should 
become  necessary  to  make  a  claim  against  the  rail- 
road company,  the  latter  could  compel  the  shipper  to 
show  proof  of  weight,  quantity,  and  condition  of  the 
material  when  it  was  loaded. 

Receipt  for  Goods. — In  giving  a  *' clean"  receipt  to 
a  transportation  company  for  goods  which  arii 
boxed,  or  which  are  so  enclosed  as  not  to  permit  of 
examination  for  defects,  the  buyer  does  not  waive  his 
right  to  make  a  claim  against  the  seller  for  defects  in 
the  material,  should  any  appear  when  the  boxes  are 
unpacked  and  the  material  is  examined. 

Inspecting  Material.— The  right  to  inspect  and  re- 
ject material,  even  when  it  is  bought  ^'f.o.b.  shipping 
point,"  remains  with  the  buyer  until  the  shipment 
has  arrived  at  destination.  If  the  material  should  not 
be  of  proper  quality,  it  can  then  be  rejected,  for,  if 
this  is  the  case,  the  seller  has  not  performed  his  part 
of  the  contract. 

Terms  Printed  on  Order  Forms.— Many  order  formg 
used  by  the  purchasing  agent  include  a  printed  clause 
that  sets  forth  the  buyer's  terms.  It  is  poor  policy  to 
make  any  stipulation  of  this  kind,  since  arbitrary 
terms  cannot  be  enforced.  There  are  so  many  varia- 
tions in  terms  that  the  really  good  buyer  must  permit 
flexibility  in  this  respect,  and  not  attempt  to  insist  on 
hard  and  fast  terms  of  his  own  choosing.  If  one  of 
the  order  forms  referred  to  were  sent  to  a  seller  in 
response  to  a  quotation,  and  the  terms  printed  on  the 
order  were  not  in  agreement  with  the  seller's  terms, 
it  would  not  constitute  a  legal  contract. 


Terms  of  Payment.— The  terms  of  credit— some- 
times called  period  of  credit— mentioned  in  a  contract 
begin  at  the  date  of  delivery.  If  the  delivery  point 
is  at  destination,  the  buyer,  in  making  settlement,  is 
entitled  to  assume  that  the  date  of  invoice  is  con- 
current with  date  of  arrival  of  the  goods  at  destina- 
tion. A  stipulation  to  this  effect  should,  however,  be 
inserted  in  the  contract,  since  usually  the  implied  un- 
derstanding is  that  an  invoice  dates  from  the  time  of 

shipment. 

Cash  Discounts.— ** Two  per  cent,  ten  days,"  and 
**Two  per  cent,  ten  day  from  date  of  shipment,"  are 
not  synonymous  terms.  The  latter  means  exactly 
what  it  says,  the  former  period  is  governed  by  the 
delivery  point  named  in  the  order. 

No  Extra  Dating.— Invoices  that  bear  the  imprint, 
or  have  terms  stated  on  them,  reading  "No  extra 
dating,"  require  that  the  bill  be  paid  at  the  termi- 
nation of  the  discount  period.  For  instance,  *'Two 
per  cent,  ten  days,  no  extra  dating"  means  that  the 
invoice  must  be  paid  in  ten  days. 

Cash  Discounts  and  Freight  Allowance.  —  When 
goods  are  sold  subject  to  a  cash  discount  and  a  freight 
allowance,  the  allowance  must  be  deducted  before  the 
cash  discount.  The  freight  allowance  comes  in  the 
same  category  as  any  other  allowance  or  trade  dis- 
count. Any  deduction  of  this  nature  would  be  sub- 
tracted from  the  invoice  before  the  cash  discount  was 
deducted. 

Terms  on  Invoices. — *'No  anticipation  allowed"  is 
a  term  sometimes  used  on  invoices,  although  it  ap- 
pears very  seldom.     The  intention,  when  it  is  used, 


!|| 


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I 


is  to  prevent  the  buyer  from  endeavoring  to  secure  a 
larger  cash  discount  than  usual  by  making  payment 
before  the  date  agreed  upon. 

Lost  Invoices. — Loss  of  an  invoice  in  the  mails  docs 
not  release  the  buyer  from  the  obligation  to  pay  for 
goods  within  the  specified  contract  time.  By  properly 
addressing  the  invoice,  affixing  the  necessary  stamps, 
and  mailing  it,  the  seller  has  completed  all  that  he  is 
compelled  to  do;  the  post  office  really  acts  as  agent 
for  the  buyer.  If  the  contract  entitled  the  buyer  to, 
say,  five  per  cent  cash  discount  in  ten  days,  he  would 
have  to  pay  within  ten  days  from  the  time  the  goods 
were  delivered,  even  if  the  invoice  were  lost. 

Settlement  of  Debit  by  Part  Payment. — When  a 
creditor  accepts,  in  full  payment  of  a  debit,  a  smaller 
sum  than  the  actual  amount  of  the  debit,  that  debit 
is  not  completely  liquidated,  and  he  can  still  collect 
the  balance.  In  all  cases  of  this  kind,  there  nmst  be 
some  consideration  in  addition  to  the  payment.  For 
instance,  the  payment  may  be  made,  and  settlement 
may  be  effected  in  consideration  of  the  payment  being 
made  in  advance  of  the  due  date  of  bill,  or  in  con- 
sideration of  there  being  defective  material  or  dam- 
ages.   Stipulation  should  be  made  to  this  effect. 

Time  of  Payment. — A  buyer  may  withhold  payment 
until  delivery  is  made  by  the  seller  at  the  point 
agreed  upon.  If  there  is  a  credit  period,  then  pay- 
ment can  be  withheld  until  its  expiration.  The  pay- 
ment of  freight  by  either  buyer  or  seller  does  not 
affect  this  question. 

Credit  Period. — When  a  contract  is  made  in  whicli 
no  Deriod  of  credit  is  mentioned,  the  seller  may  de- 


mand payment  on  delivery.  The  buyer  may  not 
plead,  ''Trade  usuage  or  custom  generally  allows  30, 
60,  or  90  days.''  Possibly  the  seller  may  not  con- 
sider that  the  buyer's  credit  warrants  the  risk  en- 
tailed in  allowing  him  the  usual  period  in  which  to 
make  payment.  When  purchasing  on  a  credit  basis, 
the  buyer  is  bound  to  keep  his  credit  good. 

Payments. — If  a  debtor  owes  several  amounts  to 
one  creditor  and  makes  a  payment,  specifically  stating 
that  it  is  to  be  applied  on  a  certain  item,  it  must  be 
so  applied.  The  creditor  may  not  accept  the  payment 
and  then  apply  it  against  some  other  item,  even  if 
payment  for  that  item  is  overdue.  If  no  stipulation 
is  made  by  the  debtor  when  he  sends  a  remittance, 
the  creditor  may  apply  the  payment  in  whatever  man- 
ner he  pleases. 

Date  of  Invoices. — It  is  a  common  practice  of  sellers 
to  date  all  invoices  the  day  shipment  is  made,  irre- 
spective of  the  point  of  delivery.  Delivery  and  pay- 
ment are  concurrent  conditions  in  every  contract, 
unless  a  statement  to  the  contrary  is  made.  There- 
fore, in  all  cases  in  which  the  contract  calls  for  "de- 
livery f.o.b.  destination,"  the  invoice  is  antedated  if 
it  bears  an  earlier  date  than  the  time  on  which  the 
goods  reached  their  destination.  Very  little  attention 
is  paid  to  the  dates  of  invoices  that  carry  no  cash  dis- 
count. The  above  point  is  worth  remembering — it 
might  be  important  in  instances  in  which  goods  took 
several  weeks  in  transit. 


RAW  MATERIAL  AND  SUPPLIES 


315 


if 


CHAPTER  XVI 
KAW  MATERIAL  AND  SUPPLIES. 

A  Form  of  Wealth.— The  acquisition  of  raw  ma- 
terial and  supplies  for  an  industrial  establishment  is 
an  investment  made  with  a  specific  object  in  view. 
It  is  not  an  aimless  exchange  of  one  form  of  wealth 
for  another.  The  property  purchased  is  not  supposed 
to  lie  dormant;  although  it  may  be  at  rest  tor  periods 
of  varying  lengths  before  becoming  an  active  and 
essential  part  of  the  manufacturing  process. 

All  forms  of  wealth  must  be  guarded,  controlled, 
cared  for,  checked,  and  kept  in  such  shape  that  the 
quantity  possessed  can  be  readily  ascertained.  An 
example  of  wealth  in  its  commonest  form  is  money; 
special  institutions— banks— exist  for  its  safekeeping 
and  for  facilitating  its  transfer  between  parties  hav- 
ing commercial  transactions.  Conservation  of  natural 
resources  and  tables  concerning  them,  the  taking  of 
censuses,  and  statistics  regarding  health,  are  other 
forms  of  controlling  and  recording  wealth. 

The  property  acquired  as  raw  material  for  con- 
version into  the  finished  product  of  a  manufacturing 
establishment  takes  the  form  of  bulk.  It  needs  space 
and  storage  capacity  for  its  proper  conservation,  for 
protection  against  physical  depreciation  and  for  dis- 
posing of  it  in  accordance  with  pre-arranged  plans. 

314 


Material  possessions,  whatever  their  nature,  are 
liable  to  depreciate  in  monetary  value;  conversely, 
they  may  appreciate.  While  the  latter  is  desirable, 
it  is  not  a  primary  consideration  in  accumulating  the 
raw  material  and  supplies  for  manufacturing  pur- 
poses. Depreciation  in  cash  value,  naturally,  is  not 
desirable  while  the  goods  are  at  rest  in  the  stores, 
or  during  the  period  of  their  conversion  into  the 
finished  product,  and  foresightedness  in  purchasing 
can,  to  a  large  extent,  secure  protection  against  it. 

In  discussing  storage  problems,  many  writers  argue 
that  there  is  depreciation  in  the  value  of  material 
during  the  period  it  is  carried  in  the  stores,  because 
of  the  various  factors  of  expense  connected  with 
handling  and  storing.  This  is  not  literally  true. 
These  factors  add  to  the  cost,  but  they  do  not  de- 
preciate the  value.  This  additional  cost  must  be 
absorbed  in  computing  the  cost  of  the  manufactured 
product.  Now,  as  all  expenses,  all  effort,  and  all  out- 
goings of  every  description  must  in  the  last  analysis 
appear  in  the  cost  of  making  and  disposing  of  a 
product,  and  as  the  primary  object  is  to  keep  these 
costs  at  the  minimum,  it  is  apparent  that  storage  prob- 
lems are  of  considerable  economic  importance. 

Cost  of  Storage.— Due  to  the  fact  that  storage  con- 
siderations vary  tremendously  with  the  product,  the 
location,  the  length  of  the  quiescent  period,  and  other 
conditions,  there  never  can  be  any  hard  and  fast 
rules  concerning  the  cost  of  storage  as  an  economic 
proposition.  The  permanent  investment — that  is  to 
say,  the  cost  of  construction  of  the  building— is  a 
factor  of  some  magnitude  if  the  space  occupied  for 


\  :•  i 


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RAW  MATERIAL  AND  SUPPLIES 


317 


11^ 


storage  purposes  is  large  and  is  located  in  an  expen- 
sive section  of  a  city  or  other  congested  district. 
Such  a  condition  may  well-nigh  prohibit  the  utiliza- 
tion of  any  large  area  for  this  purpose.  If  space  is 
curtailed  for  this  reason,  the  storeroom  itself  may 
readily  acquire  a  congested  condition,  with  all  thr 
accompanying  inconveniences  of  handling  and  stor- 
ing. Only  one  result  is  possible  where  insufficient 
facilities  exist— an  additional  expense.  It  often  means 
that  material  must  be  handled  more  frequ(mtly  than 
it  would  if  ample  facilities  existed.  Lack  of  space 
and  the  extra  handling  involved  adds  materially  to 
the  cost  and  may  cause  damage  to  the  goods. 

An  investment  in  equipment  is  also  necessary.  This 
equipment  is  both  fixed  and  movable,  and  is  also 
affected  by  space  conditions.  With  an  ample  area 
the  material  can  be  moved  freely,  easily,  quickly,  and 
at  less  cost  than  in  a  crowded  storeroom.  In  figuring 
storage  costs  both  forms  of  investment  must  be  taken 
into  the  calculations,  with  the  attendant  interest 
charges  and  the  depreciation  charges  on  building  and 
equipment. 

The  interest  charge  on  the  money  invested  in  ma- 
terial and  supplies  is  a  factor  in  storage  costs  which 
cannot  be  determined  accurately.  Credit  periods 
obtained  by  the  purchasing  agent  vary  greatly  and, 
in  some  cases,  it  may  be  possible  that  the  material 
will  have  passed  through  the  stores  and  be  under 
manipulation  in  the  shop  before  any  moiKiy  is  dis- 
bursed in  payment.  There  is  of  course  an  invest- 
ment and  a  corresponding  interest  on  all  material 
in  the  shop,  and  this  continues  until  the  product  is 


finally  disposed  of;  but  the  present  discussion  is 
limited  to  the  withdrawal  of  the  material  from  the 
stores  for  use  in  production  work.*  Other  material 
may  be  paid  for  even  before  it  arrives  at  the  factory. 
Strict  accuracy  in  obtaining  costs  would  necessitate 
the  determination  of  the  actual  cash  outlay  on  each 
article  for  the  exact  time  which  lapses  between  the 
payment  and  the  movement  of  the  goods  out  of  the 
stores. 

It  is  possible  to  determine  accurately  the  items  of 
general  burden  and  overhead  connected  with  cost  of 
storage.  Salaries  and  book-keeping  expenses,  wages 
incurred  in  receiving,  handling  and  delivering,  and 
also  the  insurance  expense  item,  are  generally  pos- 
sible of  exact  determination. 

Factors  which  Reduce  Values. — ^Depreciation  in 
money  value  has  already  been  alluded  to.  Good  buy- 
ing should  reduce  this  to  a  minimum;  but  reduced 
values  will  occur  sometimes  from  this  cause  in  spite 
of  the  precautions  taken  in  buying.  If  the  market 
price  of  a  material  should  decline  during  the  storage 
period,  and  the  finished  product  is  largely  composed 
of  this  material,  it  is  extremely  probable  that  there 
would  also  be  a  decline  in  the  market  price  of  the 
finished  product. 

In  many  cases,  deterioration  in  the  physical  char- 
acteristics of  materials  in  storage  need  not  be  con- 
sidered, but  in  some  instances  there  is  a  more  or  less 
intangible  loss  of  quality.  Perishable  goods,  as 
usually  designated,  are  not  often  met  with  in  manu- 


*  For  a  discussion  of  stores  hnndlinp  from  the. cost  standpoint, 
see  Industrial  Cost  Finding,  Vol.    5,    Factory  Management  Course. 


-y. 


318 


PURCHASING  AND  STORING 


RAW  MATERIAL  AND  SUPPLIES 


319 


llf 


facturing  establishments;  but  semi-perisliable  mate- 
rial, such  as  paper  and  rubber  goods,  are  liable  to 
deterioration,  and  many  other  materials  nmst  have 
protection  against  rust  and  weather  conditions. 
Also  some  materials  suffer  from  abrasion  in  handling. 
While  great  care  may  be  taken  to  prevent  deteriora- 
tion from  these  causes,  some  loss  in  value  may  occa- 
sionally take  place. 

Industrial  storage  problems  do  not  include  the 
bugbear  of  the  retail  merchant,  who  may  find  himself 
faced  with  a  sudden  change  of  fashion  and  fancy 
which  may  render  much  of  his  stock  of  little  value. 
But  there  is  a  somewhat  parallel  pitfall  in  the  fact 
that  new  discoveries,  or  processes,  or  developments 
in  manufacturing  may  necessitate  an  improvement  of 
the  product,  and  whatever  quantity  may  be  in  stor- 
age may  become  obsolete  or  partially  so.  The  danger 
from  this  cause  is  naturally  much  greater  in  manu- 
factured goods  than  it  is  in  the  raw  materials.  This 
risk  of  evolutions,  however,  does  not  often  come  so 
suddenly  that  one  cannot  ''get  from  under"  without 
any  serious  loss. 

The  Great  Stores  Problem.— An  active  industrial 
establishment  has  an  insatiable^  maw  for  raw  material. 
It  consumes  it  without  cessation.  The  general  store- 
keeper knows  that  he  must  provide  for  the  demand, 
that  there  may  be  neither  let  nor  hindrance  in  the 
factory  operations.  Knowing  the  importance  of  this 
— knowing  the  imperative  necessity  for  maintaining 
a  supply  in  unbroken  continuity— he  could  play  safe 
and  always  have  on  hand  such  a  great  sufficiency 
that  would  take  care  of  any  situation  or  any  con- 


tingency. No  good  storekeeper  would  do  this,  how- 
ever, for  he  would  consider  the  economic  factors  that 
continually  add  to  the  cost,  and  the  economic  and 
physical  factors  which  may  degrade  the  value  of  the 
goods  under  his  charge. 

The  element  of  time  is  the  one  which  forces 
itself  to  the  attention  of  the  storekeeper.  A  banker, 
when  he  has  more  cash  on  hand  than  he  requires  for 
current  needs,  puts  every  dollar  above  the  established 
safety  mark  out  to  work  for  him.  The  storekeeper 
also  has  a  safety  minimum,  and  he  too  endeavors  to 
put  into  active  service  as  much  of  his  surplus  as 
possible.  This,  as  already  explained,  is  because  time 
is  constantly  working  against  him  and  is  increasing 
the  cost  of  all  the  material  in  storage. 

Time  is  the  great  storage  problem.  Time  is  work- 
ing against  values  twenty-four  hours  a  day  and  every 
day  in  the  year.  There  is  only  one  possible  way  that 
time  can  render  a  service  of  a  favorable  character  to 
the  storage  problem,  and  that  is  through  a  change  in 
market  prices  which  might  appreciate  the  intrinsic 
value  of  the  material  during  the  storage  period. 
From  a  strictly  storage  point  of  view  this  factor 
cannot  be  considered, — at  least  not  from  an  economic 
standpoint.  The  only  true  way  for  the  storekeeper 
to  base  all  his  calculations  is  on  the  economic  factors. 
These  can  be  established  and  if  the  combined  judg- 
ment of  the  purchasing  and  production  departments 
decrees  a  purchase  in  excess  of  the  maximum  set  by 
the  storekeeper,  these  two  departments  must  set  the 
storekeeper's  bill  of  costs  against  the  appreciation 
they  hope  to  gain. 


320 


PURCHASING  AM)  STOlUxNG 


RAW  MATERIAL  AND  SUPPLIES 


321 


^ 


ui 


1 


Profits  in  Storage. — While  refusing  to  consider 
profits  or  appreciation  in  values  from  the  store- 
keeper's point  of  view,  ther^^  are  nevertheless  some 
profits  in  storage,  although  ])asic  cost  kec^ping  prin- 
ciples do  not  and  can  not  sanction  an  assumption  of 
a  profit  in  the  storage  function.  From  the  inception 
to  the  final  completion  of  the  manufacturing  process, 
costs  must  follow  a  well-defined  and  regulated  course; 
and  as  the  accretions  follow  one  another  in  their 
proper  rotation,  the  cost  of  storage  must  take  its 
appointed  place,  ignoring  any  question  of  apprecia- 
tion in  values. 

In  view  of  the  remarkable  advances  in  the  prices 
of  nearly  all  raw  materials  during  recent  years  the 
question  may  be  raised  as  to  what  becomes  of  the  so- 
called  profits  in  storage.  It  has  been  quite  possible 
for  a  concern  to  inventory  100,000  pounds  of  steel  at 
a  price  of  two  dollars  per  hundred  pounds,  and  a 
year  later  inventory  the  same  quantity  at  four  dol- 
lars per  hundred  pounds.  It  would  seem  at  first 
glance  that  here  was  a  profit  of  two  thousand  dol- 
lars; but  this  is  far  from  being  the  case,  unless  during 
the  interval  between  the  inventories  the  price  of  all 
incoming  steel  had  been  at  the  figure  prevailing  when 
the  first  inventory  was  taken.  This  is  an  impossibL; 
condition  in  the  advancing  market  such  a  change  in 
price  would  indicate.  The  amount  of  steel  in  tlie 
stores  when  the  first  inventory  was  taken  would  be 
absorbed  into  the  manufacturing  costs  at  the  pric(^ 
paid  for  it.  All  shipments  Sf  steel  coming  into  the 
stores  would  likewise  be  absorbed  at  the  advanced 
prices  paid  for  each  respective  shipment.    There  re- 


mains, then,  only  the  last  100,000  pounds  which  may 
have  come  into  the  stores  at  a  price  of  $3.50  per 
hundred  pounds.  On  paper  this  would  show  a  store's 
profit  of  $500  if  the  inventory  were  figured  at  market 
prices.  Should  this  be  the  case  then  all  outgoings 
from  the  stores  from  date  of  inventory  must  be 
absorbed  into  manufacturing  costs  at  the  inventory 
prices,  otherwise  serious  descrepancies  would  occur. 
Theoretical  profits  may  be  figured  in  the  operation 
of  the  stores  of  an  industrial  establishment,  but  in 
practice  a  credit  balance  cannot  be  transferred  from 
the  stores  to  the  profit  and  loss  account,  although  it 
might  be  done  in  the  case  of  a  supply  house,  a  dealer, 
or  a  jobber.  In  a  manufacturing  establishment  the 
balance  sheet  should  reflect  the  activities  of  the  pur- 
chasing agent  and  storekeeper,  but  even  favorable 
action  by  them  might  be  counteracted  by  a  stationary 
or  decreasing  price  for  the  finished  output  of  the 
factory. 

Safe  and  Sane  Storekeeping.— Too  much  worrying 
about  moderate  price  fluctuations  is  apt  to  destroy 
good  storekeeping.  The  fundamental  economic  fac- 
tors may  be  lost  sight  of,  and  the  luxury  of  over- 
stocking may  be  indulged  in,  or  it  may  result  in  the 
reverse  condition  of  a  shortage  with  all  its  attendant 
evils.  From  the  storekeeper's  point  of  view,  there- 
fore, the  only  rational,  safe,  and  sound  policy  is  to 
ignore  these  variations  and  allow  the  purchasing 
agent  to  deal  with  the  problems  of  price  fluctuations 
and  market  conditions.  For  a  storekeeper  of  an 
industrial  establishment  to  commence  pondering 
whether  market  conditions  warrant  stocking  up  on 


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RAW  MATERIAL  AND  SUPPLIES 


323 


one  thousand  or  ten  thousand  pounds  of  copper  bars 
is  dangerous. 

Scientific  rules  can  be  laid  down  for  determining 
the  maximum  and  minimum  quantities  to  carry  in 
the  stores,  and  the  storekeeper  should  adhere  rigidly 
to  these  rules.  It  is  purely  a  problem  of  internal 
management,  and  external  conditions  must  not  be 
allowed  to  influence  or  interfere  in  the  determination 
of  the  limits.  When  these  limits  are  set  in  botli 
directions,  then  other  factors  may  properly  be  takc^i 
into  consideration.  When  it  becomes  necessary  to 
question  the  advisability  of  exceeding  or  curtailing 
the  safety  limits  set  by  the  inexorable  demands  of 
the  production  department  and  the  economic  factors 
connected  with  good  storage,  then  the  storekeeper 
may  be  called  into  consultation  to  set  forth  these 
factors  as  an  aid  and  assistance  in  arriving  at  a 
decision  regarding  tlie  departure  from  the  rules. 

To  Store  or  Not  to  Store. — This  is  not  a  new  prol)- 
lem,  but  it  is  a  problem  which  is  attaining  a  new 
importance.  The  significance  of  the  question  has 
recently  been  rapidly  and  forcefully  compelling  the 
attention  of  concerns  which  buy  for  manufacturing 
purposes,  for  resale  purposes,  for  future  distribution 
in  any  form,  or  for  consumption.  Unobtrusively 
perhaps,  but  none  the  less  surely,  the  issue  is  pent'- 
trating  every  activity  which  involves  the  retention 
for  a  long  or  short  period  of  materials  and  supplies 
in  any  form. 

The  new  importance  of  the  subject  is  largely  bi'- 
cause  of  better  methods  of  figuring  costs  and  a  better 
realization  of  these  costs  in  so  far  as  the  material  in 


the  stores  is  affected.  Probably  the  matter  of  storage 
costs  has  been  brought  more  prominently  to  the  front 
by  the  abnormal  market  conditions  which  have  pre- 
vailed during  the  past  few  years. 

A  '* sufficient  unto  the  day"  policy  has  brought 
some  rude  jolts  to  many  manufacturing  establish- 
ments. It  is  only  necessary  to  look  through  the 
technical  and  trade  periodicals  of  recent  times  to 
note  the  tales  of  woe  of  industrial  concerns  forced  to 
suspend  or  curtail  operations  because  of  a  shortage 
of  coal  or  some  other  essential  commodity  or  material. 
Mere  price  fluctuations  do  not  create  shortages  except 
as  they  may  be  allowed  to  influence  the  buying  or 
storage  policy  of  individual  cases.  The  question  is 
deeper  than  just  one  of  price.  Lack  of  labor,  car 
shortages,  embargoes,  and  other  factors  have  all 
brought  the  storage  problem  prominently  to  the 
front,  and  all  of  these  have  had  their  influence  in 
causing  a  deeper  study  of  storage  costs,  and  conse- 
quently of  the  problem  of  whether  to  store  or  not  to 
store. 

Extremes  of  the  Storage  Problem. — Available  stor- 
age space  and  other  physical  conditions,  and  also 
financial  considerations  may  compel  the  adoption  of 
a  middle  ground  or  neutral  policy,  but  unhampered 
by  these  restrictions  extremes  are  apt  to  be  indulged 
in  in  times  of  stress.  On  the  one  hand  is  the  store- 
keeper alarmed  by  tardy  and  deferred  shipments,  co- 
operating with  a  purchasing  agent  who  is  also 
alarmed  but  for  a  different  reason,  that  of  rapidly 
rising  prices.  This  combination  may  develop  wild 
buying  and  storing,  which  is  merely  speculative  or 


324 


PURCHASING  AND  STORING 


perhaps  is  consummated  to  secure  peace  of  mind  for 
the  storekeeper  and  purchasing  agent. 

The  other  extreme  is  illustrated  by  a  too  compla- 
cent attitude  of  both  the  storekeeper  and  purchasing 
agent,  resulting  perhaps  in  hurried  purcliuses  from 
warehouses  at  prices  so  much  higher  than  those  pre- 
vailing for  mill  shipments  that  the  storage  costs  are 
exceeded  many  times.  Storage  problems  cannot  be 
solved  by  chance  or  impulse,  they  are  a  matter  of 
cool,  calm  calculation  of  relative  advantages  and  dis- 
advantages. 

Psychological  Factors  in  Storage.— For  its  effect  on 
the  worker  there  is  nothing  that  is  quite  equal  as  a 
stimulant  to  productive  labor  to  the  knowledge  that 
there  is  an  abundance  of  material  ahead  upon  which 
to  work.  Noting  daily  the  dwindling  pile  of  material 
or  the  inability  to  get  freely  what  is  needc^d  from  the 
stores,  the  workman  will  slacken  his  efforts,  perhaps 
unconsciously. 

As  an  illustration  of  this  watch  any  laborer  shovel- 
ing a  pile  of  sand.  As  long  as  there  is  plenty,  he  will 
work  with  energy,  but  as  the  pile  diminishes  his 
energy  also  diminishes.  Drop  a  fresh  pile,  and  his 
energy  seems  to  take  on  new  life  and  vigor. 

Some  concerns  have  allowed  their  taxes  to  influence 
the  storage  problem.  Alarmed  over  in<?ome  and 
threatened  excess-profits  taxes,  they  have  permitted 
themselves  to  invest  part  of  their  profits  in  stored 
supplies  rather  than  to  have  the  amounts  appear  in 
the  profit  and  loss  or  surplus  account.  To  (?vade  suc- 
cessfully the  real  or  threatened  impost,  this  policy 
must  be   continued   indefinitely   from  year   to   year; 


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and  when  all  the  risks  of  storage  are  taken  into  ac- 
count and  a  close  estimate  compiled  of  the  cost  there 
can  only  be  some  isolated  instances  where  such  a 
venture  could  be  considered  as  good  business. 

Standardization  of  Supplies. — Much  useful  work 
in  the  standardization  of  supplies  can  be  effected 
through  the  storeroom.  In  the  previous  discussion 
of  purchasing,  emphasis  was  laid  on  this  subject. 
The  storeroom  can  also  have  a  hand  in  bringing 
some  of  the  problems  to  a  satisfactory  solution.  The 
storeroom  clerks  come  into  physical  contact  with  the 
various  supplies,  and  a  multiplicity  of  these  ranged 
alongside  of  each  other  m  the  storeroom  is  convinc- 
ing evidence  of  the  need  for  reform.  Some  small 
tools  come  Under  a  need  for  standardization  also.  It 
is  not  uncommon  to  find  that  several  kinds  of  hack- 
saw blades  are  being  used  for  similar  work,  because 
one  department  may  not  know  that  another  depart- 
ment is  requisitioning  a  different  make.  Such  things 
as  brooms,  brushes,  cotton  waste,  and  so  on,  are 
peculiarly  susceptible  to  duplication. 

It  is  not  economical  to  carry  in  stock  several  vari- 
ations of  articles  of  a  similar  nature  when  possibly 
the  requirements  of  all  departments  and  the  whole 
establishment  could  be  satisfied  by  a  lesser  number 
of  styles.  Having  physical  possession  of  these  styles 
and  having  them  arranged  in  adjacent  receptacles,  it 
can  be  demonstrated  that  some  of  them  can  be  dis- 
pensed with,  saving  storage  space  and  the  expense 
of  carrying  a  larger  number  of  articles  than  abso- 
lutely necessary. 

Almost   innumerable   instances    could    be    cited    of 


ill 


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"I 


' 


.  I 


li 


the  duplication  of  supplies  kept  in  the  stores.  The 
practice  pervades  all  sections  of  some  establishments 
and  is  particularly  noticeable  in  connection  with  office 
supplies.  Many  different  kinds  of  inks,  pencils,  car- 
bon papers,  and  so  on,  are  purchased  when  the  re- 
quirements of  all  departments,  possibly,  could  be 
satisfied  with  one  variety.  If  a  store  is  carrying 
three  varieties  of  an  article  with  a  minimum  of  one 
hundred  units  of  each,  it  is  quite  possible  that  by 
carrying  one  class  only  in  stock  the  minimum  could 
be  fixed  at  one  hundred  and  fifty.  Here  we  get  a 
reduction  in  stock  in  one  hundred  and  fifty  units  and 
a  reduction  in  storage  space  that  should  be  equiva- 
lent to  more  than  this  number. 

Correct  Definitions.— In  Chapter  II  the  question  of 
correct  definitions  and  specifications  was  covered  ex- 
haustively. Next  to  the  purchasing  department  the 
stores  department  is  interested  in  this  matter  to  a 
larger  extent  than  any  other.  More  requisitions  are 
sent  from  the  stores  to  the  purchasing  department 
than  from  any  other  department,  and  it  is  therefore 
essential  that  these  be  correct  to  save  time  and  trouble 
in  both  departments. 

It  is  not  an  easy  matter  to  get  all  the  foremen  in 
a  large  establishment  to  specify  correctly  each  article 
in  making  requisitions  for  material  from  the  stores, 
but  undoubtedly  considerable  improvement  could  be 
effected  in  the  conditions  existing  in  many  plants. 
Even  if  requisitions  for  material  come  into  the  stores 
with  incorrect  descriptions,  the  stores  department 
should  not  repeat  these  in  writing  up  the  requisitions 
which  go  to  the  purchasing  department.    The  stores 


department  is  between  the  buyer  and  user  of  the 
material  and  can  materially  help  in  the  adoption  of 
correct  and  uniform  methods  of  specifying  and  defin- 
ing all  materials  and  supplies. 

Inventory  Price  and  Market  Value. — ^Customary  ac- 
counting methods  are  not  opposed  to  inventorying 
raw  material  at  the  market  price  prevailing  when 
inventory  is  taken,  but  there  are  times  when  a  sound 
business  policy  could  scarcely  justify  this.  There  is 
a  trite  saying  in  the  speculative  world  that  '*what 
goes  up  must  come  down."  If  this  is  true,  then  an 
inventory  taken  at  the  top  of  an  unusual  rise  would 
be  fictitious  and  simply  show  inflated  profits.  A  later 
inventory  taken  after  a  severe  downward  movement 
might  then  indicate  losses  which  had  not  actually 
been  incurred. 

When  conditions  are  unusual,  the  customary 
methods  are  hardly  applicable.  For  example,  if  the 
country  has  experienced  a  continued  and  prolonged 
advance  in  prices  of  all  raw  materials  for  several  years 
and  the  indications  for  the  future  are  that  this  up- 
ward tendency  will  be  maintained,  why  then  should 
not  a  manufacturer  inventory  the  stores  at  the  exist- 
ing market  price  and  figure  it  as  profit!  Even  if  a 
decline  is  not  imminent,  even  if  the  exceptional  price 
level  is  maintained  for  another  year,  the  manufac- 
turer will  ultimately  be  faced  with  the  reverse  of  the 
problem — a  stock  of  raw  materials  contracted  for  at 
high  prices  and  a  rapidly  falling  market.  At  pres- 
ent the  manufacturer  may  show  his  profits  from  the 
rise;  his  losses  are  still  matters  of  the  future. 
The  conservative  manufacturer  can  only  treat  ab- 


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normal  rises  in  prices  in  one  way  in-so-far  as  his  in- 
ventory is  concerned.  He  should  figure  that  he  has 
but  half  completed  the  transaction  and  that  he  had 
better  not  consider  the  increase  in  the  values  of  his 
raw  materials  as  a  profit.  He  should  consider  that 
he  is  temporarily  custodian  of  a  goodly  sum,  a  part 
of  which  may  remain  with  him  if  his  judgment  has 
been  sound  and  no  adverse  conditions  arise.  Should 
high  prices  continue  from  one  inventory  to  another 
until  they  become,  in  a  sense,  almost  normal,  it  may 
be  permissible  to  consider  part  of  the  advance  as 
profit,  but  a  certain  amount  should  be  set  aside  as  a 
reserve  against  a  decline  that  is  inevitable. 

Storage  Space  and  Production. — There  should  be  a 
proper  balance  maintained  between  storage  space  and 
production  requirements.  Excessive  space  is  an  ex- 
pense and  increases  the  cost  of  all  goods  in  storage, 
while  cramped  storage  facilities  has  exactly  the  same 
effect  in  that  it  may  hamper  the  free  movement  of 
the  material  or  necessitate  handling  it  twice.  There 
is,  perhaps,  another  more  vital  reason  against  in- 
sufficient storage  space.  It  is  this,  that  the  minimum 
quantity  of  each  class  of  material  may  be  cut  to  a 
point  where  the  proper  factor  of  safety  is  dis- 
regarded. 

In  manufacturing  a  staple  product  (or  one  machine, 
such  as  an  automobile),  it  is  possible  to  determine 
with  a  nice  degree  of  accuracy  the  proper  proijortioii 
between  storage  space  and  production  space;  but 
when  a  large  number  of  articles  are  made,  some  of 
which  are  at  times  in  greater  demand  than  at  others, 
the  question  becomes  more  complicated.     When  ac- 


curate areas  cannot  be  determined,  or  when  there 
may  be  some  variation  because  of  changes  in  manu- 
facturing conditions,  it  is  better  to  err  on  the  side 
of  amplitude.  This  direction  contains  fewer  elements 
which  tend  to  advance  costs,  and  certainly  has  fewer 
risks  attached  to  it. 

Establishing  the  Maximum  and  Minimum.— At  one 
time  or  another  obsolete  material  will  be  found  in 
every  factory  storeroom.  If  an  infallible  system 
existed  for  determining  the  maximum  and  minimum 
limits  this  condition  would  not  exist.  Obsolete  ma- 
terial is  dead  material.  It  is  worse  than  dead  be- 
cause, as  the  previous  discussion  has  shown,  the 
storage  cost  in  connection  with  it  is  a  live  factor  and 
continually  mounting  upwards.  It  is  imperative 
therefore  that  all  obsolete  material  be  quickly  dis- 
posed of  at  the  best  possible  prices.  But  it  would  be 
better  if  obsolete  material  were  not  allowed  to  ac- 
cumulate. Any  study  of  the  prevention  of  this  in- 
volves a  discussion  of  the  maximum  and  minimum 
limits. 

The  minimum  quantity  of  material  in  storage  is 
established  upon  certain  calculations,  the  principal  one 
being  the  determination  of  a  sufficient  supply  of  raw 
material  to  make  sure  that  the  manufacturing  pro- 
cess will  proceed  in  unbroken  continuity.  Other  ele- 
ments which  influence  the  establishment  of  the  maxi- 
mum and  minimum  are  the  available  storage  space, 
the  length  of  time  required  to  obtain  the  material, 
and  the  quantity  which  can  be  purchased  most 
economically.  All  of  these  must  be  taken  into  con- 
sideration and  carefully  balanced. 


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The  production  manager,  the  storekeeper,  and  the 
purchasing  agent  all  come  in  on  this  question.  Tak- 
ing the  production  manager's  point  of  view  first;  he 
has  to  consider  the  output  of  his  factory,  whether 
this  output  is  uniform  through  the  year,  and  whether 
any  manufacturing  changes  which  may  be  contem- 
plated are  likely  to  make  any  change  in  the  rate  of 
the  output  or  change  in  the  character  of  the  material. 

Having  determined  this  point  in  reference  to  each 
class  of  raw  material,  each  item  must  be  reviewed  at 
periodic  intervals.  Failure  to  do  this  is  frequently 
the  cause  of  shortage  of  material  or  the  accumulation 
of  obsolete-  quantities. 

It  then  becomes  the  duty  of  the  storekeeper  to 
have  the  raw  material  always  on  hand  to  supply  the 
demands  of  the  factory.  The  information  given  by 
the  production  manager  furnishes  the  basis  for  the 
storekeeper's  calculations.  He  knows  that  a  certain 
material,  for  instance,  will  be  consumed  at'  an  aver- 
age rate  of  300  pounds  per  week,  and  it  becomes  his 
duty  to  determine  the  minimum  amount  he  can  keep 
in  the  stores  to  meet  that  demand. 

Every  calculation  of  the  storekeeper  for  the  eco- 
nomic reasons  already  given,  must  have  in  view  the 
maintenance  of  his  stock  at  the  lowest  level  con- 
sistent with  safety.  The  establishment  of  a  minimum 
is  vastly  more  important  than  that  of  fixing  a  maxi- 
mum. For  every  item  in  stores  there  is  an  exact 
quantity  which  is  a  safe  minimum.  Every  time  this 
is  exceeded,  rent,  interest,  insurance,  and  every  other 
economic  factor  is  working  against  the  storeroom. 
Every  time  the  quantity  is  below  this  exact  minimum 


the  danger  is  imminent  of  a  factory  shut-down  with 
its  attendant  losses.  To  make  calculations  which 
come  anywhere  near  accuracy,  he  must  figure  the 
exact  time  required  to  receive,  inspect,  and  store  each 
item;  he  can  then  specify  on  his  requisition  to  the 
purchasing  agent  the  exact  date  on  which  the  ma- 
terial must  reach  the  factory. 

It  is  here  that  the  purchasing  agent  comes  in  with 
his   information   governing   the   delivery   conditions. 
Some  items  may  be  freely  obtained  at  a  few  days 
notice,  others  may  take  weeks,  and  others  months. 
In  all  cases  delivery  conditions  are  subject  to  changes, 
but   the  purchasing   department   should   sense   these 
changes  and  give  due  notice  to  the  storekeeper  to 
enable  him  to  prepare  his  requisitions  sufficiently  far 
ahead  of  his  requirements  to  permit  purchasing  and 
delivering  the  material. 

Looking  at  this  problem  theoretically  it  has  the 
aspects  of  a  comparatively  easy  proposition,  but  in 
practice  it  is  not  so  simple,  because  many  of  the 
calculations  made  by  the  three  parties  most  inter- 
ested do  not  materialize  in  exactly  the  manner  esti- 
mated. It  is  necessary  therefore  to  consider  these 
variations  and  how  to  overcome  them. 

Assuming  that  the  purchasing  agent  has  entered 
into  a  contract  for  a  staple  material  to  be  supplied 
in  quantities  of  uniform  amounts  at  regular  inter- 
vals to  conform  to  the  maintenance  of  the  store- 
keeper's minimum,  still  it  may  not  be  possible  to 
secure  this  supply  regularly.  The  purchasing  agent 
must  always  have  this  contingency  in  view  and  must 
have  auxiliary  sources  from  which  he  can  supply  the 


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imil 


deficiency.  If  a  deficiency  has  to  be  made  up  by 
purchases  from  warehouses  at  a  higher  price  than 
the  mill  shipments  called  for  in  the  contract,  then  a 
decision  must  be  made  as  to  whether  it  is  a  more 
economical  proposition  to  pay  the  higher  price  or  to 
raise  the  storekeeper's  maximum  limits.  Recourse  to 
the  latter  would  increase  storage  costs  but  would  en- 
able a  larger  stock  to  be  carried  to  tide  over  periods 
of  temporary  shortage. 

The  purchasing  agent  may  find  that  the  maximum 
fixed  on  certain  items  does  not  permit  the  purchas- 
ing function  to  be  executed  on  the  most  economical 
basis.  It  may  be  found  that  purchases  made  in 
larger  quantities  can  be  obtained  at  substantial  re- 
ductions in  prices,  or  advantages  can  be  secured  in 
transportation  and  delivery  charges.  A  careful  con- 
sideration of  these  points  may  also  result  in  a  deci- 
sion to  raise  the  maximum  limits. 

One  of  the  most  difficult  situations  to  deal  with 
is  m  connection  with  a  growing  scarcity  of  a  com- 
modity and  the  attendant  uncertainty  regarding  de- 
livery. There  have  been,  for  example,  many  in- 
stances where  a  commodity  could  be  obtained  with 
reasonable  certainty  one  month  after  placing  an 
order.  A  growing  scarcity  may  extend  this  time  to 
two  months,  and  then  to  four,  and  later  to  six 
months  or  longer,  and  even  then  the  deliveries  are 
very  uncertain  at  best.  A  four  months'  promises  of 
delivery  may  be  a  six  months'  performance.  It  is 
possible  that  the  production  manager  does  not  want 
to  commit  himself  so  far  ahead.  Such  comlitions  can 
only  be  safely  taken  care  of  by  liberally  increasing 


the  maximum  limits  to  provide  for  all  contingencies. 
There  are  some  minor  reasons  for  changing  the 
maximum,  but  the  major  ones  given  above  cover  the 
point  sufficiently.    The  result  of  changing  is  the  same 
in  every  case.    The  maximum  which  was  established 
on  a  scientific  basis,  when  departed  from  makes  the 
danger  of  accumulating  a  stock  of  obsolete  material 
a  very  live  one.    The  risks  are  of  varying  degree.   In 
many  instances  there  is  really  no  risk  that  the  ma- 
terial will  become  obsolete,  there  is  only  the  expense 
of  carrying  a  large  overstock  when  the  market  be- 
comes easier.     In  other  instances  where  a  manufac- 
turer may  be  making  a  number  of  different  types 
of  machines,  the  sales  of  these  may  be  irregular  and 
the  quantity  under  construction  in  the  shop  may  vary 
considerably,  but  nevertheless  it  is  necessary  to  carry 
a  stock  of  raw  material  to  provide  for  a  definite  num- 
ber. 

Assuming  that  the  minimum  is  fixed  on  a  basis  of 
three  months  requirements  as  determined  by  the 
average  construction  in  the  past,  if  delivery  condi- 
tions become  exceptionally  bad  it  may  be  necessary 
to  order  supplies  for  eight  or  nine  months  in  ad- 
vance. This  period,  with  the  three  months'  minimum 
stock,  means  that  a  year's  supply  of  raw  materials 
or  parts  are  under  contract  for  a  machine  which 
might  be  radically  changed  at  any  moment.  Situa- 
tions and  conditions  such  as  these  demand  the  most 
thoughtful  treatment. 

Fixing  maximum  and  minimum  limits  has  been 
called  scientific  guessing.  Economic  reasons  demand 
as  much  science  and  as  little  guessing  as  possible.   It 


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til 


% 


has  been  shown  that  important  factors  definitely  con- 
trol the  establishment  of  a  minimum,  and  that  th(» 
flexibility  allowable  in  establishing  the  maximum  is 
caused,  mainly,  by  the  freedom  of  action  essential  in 
buying,  as  well  as  by  an  increase  in  the  rate  of  pro- 
duction above  the  normal  rate  on  which  the  minimum 
is  based. 

The  Financial  and  the  Stores  Departments.— A  fal- 
lacy is  largely  prevalent  that  because  a  concern  is  in 
a  strong  position  financially,  this  very  desirable  state 
of  affairs  should  influence  the  determination  of  maxi- 
mum and  minimum  limits  in  the  raw  materials  stores. 
On  this  point,  C.  Bertrand  Thompson,  writing  in 
Factory,  states: 

The  state  of  the  financial  department  should  dettirmine  how 
much  stock  of  materials  should  be  carried.    .    .    . 

If  a  perpetual  inventory  of  each  item  in  stock  is  main- 
tained as  it  should  be,  it  takes  only  a  very  short  time  to  de- 
cide what  is  the  safe  minimum  of  stock  to  be  kept  on  hand. 
This  depends,  of  course,  on  the  rate  at  which  the  material  is 
used  and  the  length  of  time  it  requires  to  get  delivery  on  an 
order  from  the  source  of  supply.  When  the  balance  on  hand 
falls  to  this  minimum,  the  purchasing  agent  should  be  noti- 
fied to  re-order  for  replenishment.  Such  notification  may  go 
on  a  requisition  blank. 

The  quantity  that  he  shall  re-oi'der  on  this  requisition  de- 
pends, not  primarily  on  the  price  at  which  he  can  get  it,  but 
on  the  amount  of  capital  which  the  firm  is  willing  to  tie  up 
in  raw  materials  and  on  the  space  available  for  storage. 

The  purchasing  agent  has  nothing  to  do  with  either  of  these 
questions — one  is  determined  by  the  policy  of  the  financial 
managers  of  the  concern;  the  other  by  the  actual  space 
physically  available. 


It  would  seem  from  this  that  if  space  is  available, 
purchasing  should  proceed  up  to  the  limits  of  one's 
financial  resources.  Mr.  Thompson  ignores  the  eco- 
nomic factors  connected  with  storage,  and  the  only 
assumption  possible  is  that  advantage  should  be 
taken  of  a  favorable  market  to  buy  for  a  rise.  Such 
a  policy  is  better  suited  to  a  jobber  or  supply  house. 
Unless  due  consideration  were  given  to  many  other 
factors  it  might  lead  to  disastrous  consequences  in 
buying  for  the  stores  of  an  industrial  establishment. 


RECEIVING  AND  STORING 


337 


CHAPTER  XVII 

RECEIVING  AND  STORING  RAW  MATERIALS 

Equipment  and  Manual  Operations. — Large  sums 
are  constantly  being  expendeci  in  developing  and  per- 
fecting machinery  and  tools  to  obtain  quicker  and 
better  results  in  the  production  department.  There 
are  many  cases  where  industrial  establishments  are 
prodigal  in  this  respect  but  niggardly  in  others.  This 
parsimony  is  frequently  seen  in  connection  with  stor- 
age arrangements,  or  in  the  facilities  for  rc^ceiving  or 
shipping  goods.  By  way  of  comparison  take  the  tool 
room  in  some  shop  and  note  the  care  bestowed  on 
the  tools,  how  carefully  they  are  maintained  and  how 
precisely  stored.  But  in  the  same  establishment  the 
raw  material  storey  may  be  poorly  arranged,  loosely 
kept,  and  untidy  in  appearance. 

Well  arranged  and  equipped  storage  facilities  are 
absolutely  essential  in  any  modern  factory.  The  aim 
of  the  production  department  being  to  get  the  maxi- 
ihum  output  from  a  machine  at  the  minimum  cost, 
then  all  movements  leading  up  to  that  machine  or 
away  from  it  should  be  governed  by  the  same  prin- 
ciples. All  the  reduction  in  cost  effected  by  a  new 
tool  in  the  shop  can  be  more  than  offset  by  the  in- 
ordinate amount  of  time  required  to  get  the  materials 
into  incommodious  storerooms  and  out  again. 

336 


> 


Planning  and  Locating  the  Storeroom. — In  plan- 
ning the  storage  facilities,  proportion  is  one  of  two 
main  essentials  and  location  is  the  other.     Storage 
space  properly  proportioned  to  the  needs  of  a  fac- 
tory is  an  economic  factor  of  great  importance,  and 
a  well  selected  location  will  save  much  physical  ef- 
fort.   In  large  establishments  with  many  departments 
there  will  naturally  be  branch  or  subsidiary  store- 
rooms located  at  convenient  and   accessible   points. 
Some  raw  material  may  undergo  only  one  operation, 
or  pass  through  only  one  department  before  going  to 
the  assembling  shop  or  finished  stock  room.    In  such 
cases  the  material  can  go  directly  from  the  receiving 
department  to  the  storeroom  connected  with  the  de- 
partment in  which  the  work  is  to  be  done.     This 
question  of  planning  locations  scarcely  comes  within 
the  scope  of  the  present  discussion,  but  to  enable  the 
stores  to  be  handled  in  the  most  efficient  manner  it 
should  be  given  proper  consideration  in  the  layout  of 
a  plant. 

It  is  scarcely  necessary  to  point  out  that  individual 
circumstances  and  conditions  will  influence  the  amount 
of  storage  space  and  location.  The  product  of  one 
plant  may  require  the  storage  of  light  and  bulky  raw 
material,  another  of  heavy  material,  while  others  may 
use  many  small  .articles.  However  this  may  be,  there 
are  two  physical  factors  in  connection  with  any  stor- 
age proposition  which  can  be  discussed  along  the 
same  general  lines.  . 

Manual  and  Clerical  Work. — The  two  factors  re- 
ferred to  are  the  manual  work  and  the  clerical  work 
connected  with  the  operation  of  the  stores.     If  one 


338 


PURCHASING  AND  STORING 


Of  these  were  inaccurately  done,  the  result  would  be 
confusion,  regardless  of  how  accurate  the  other  might 
be.  Ckrical  records  can  be  very  simple  but  very 
complete  and  absolutely  accurate;  but  if  a  shipment 
ot  ii.32  machine  screw  nuts  was  dumped  into  the  bin 
contaimng  10-30  nuts,  or  if  a  helper  handed  out  110 
pounds  of  copper  rod  instead  of  100  pounds,  the  cleri- 
cal records  would  not  tally  with  the  contents  of  the 
racks  and  bins  The  closer  these  two  features  can  be 
brought  into  harmony  the  nearer  is  the  operation  ot 
them  brought  to  a  state  of  perfection. 

Generally  speaking  more  attention  has  been  paid  to 
securing  accuracy  in  the  clerical  work  than  in  the 
manual  operations,  but  the  demand  for  better  methods 

counnL        '  t^"   "^'^''"P"''    "^"5^   appliances    for 
Zn^f'  '"'^«\'"^'  ,inea«'^ring,  handling  and  trans- 

Zn  « V^""  TT''  ^"*^  ^"^P"^^-    Many  improve- 
ments have  also  been  effected  in  the  arrangement 
and  equipment  of  storerooms,  conserving  space    re 
ducing   labor    and   expediting   and   facilitating'  the 
handling  of  the  contents.  No  discussion  of  stores  prob- 

oTor  f  ^:  ""f ''''^  '^^'"P'^t^  ""h°"<  reference 
to  some  of  these.    It  would  be  manifestly  impossible 

to  describe,  or  even  mention,  all  the  good  things  the  e 

are  on  the  market  at  the  disposal  of  and  suitablelo 

storeroom  use     In  calling  attention  to  a  few  of  them 

therefore.  It  is  not  intended  to  discriminate  againT 

"'ilT'^T''^"^'?"'^^  ""'''''  ^"'i  usefulness 

The  Counting  Problem—Comparatively  few  things 
hat  are  handled  in  bulk  in  factories  are  vl  ed  fn 
size    weight,  or  character.     Consequently  the  great 
problem  is  one  of  counting,  with  L  least  expendi 


INTENTIONAL  SECOND  EXPOSURE 


338 


PURCHASING  AND  STORING 


I'M' 


I 


'I !  lilt 


of  these  were  inaccurately  done,  the  result  would  be 
confusion,  regardless  of  how  accurate  the  other  might 
be.  Clerical  records  can  be  very  simple  but  very 
complete  and  absolutely  accurate;  but  if  a  shipment 
ot  «-d2  machine  screw  nuts  was  dumped  into  the  bin 
containing  10-30  nuts,  or  if  a  helper  handed  out  110 
pounds  of  copper  rod  instead  of  100  pounds,  the  cleri- 
cal records  would  not  tally  with  the  contents  of  the 
racks  and  bins.  The  closer  these  two  features  can  be 
brought  into  harmony  the  nearer  is  the  operation  ot 
them  brought  to  a  state  of  perfection. 

Generally  speaking  more  attention  has  been  paid  to 
securing  accuracy  in  the  clerical  work  than  in  the 
manual  operations,  but  the  demand  for  better  methods 
m  the  latter  has  developed  many  appliances  for 
counting,  weighing,  measuring,  handling  and  trans- 
porting raw  materials  and  supplies.  Manv  improve- 
nieiits  have  also  been  effected  in  the  an-angement 
and  equipment  of  storerooms,  conserving  space,  re- 
ducing labor,  and  expediting  and  facilitating  the 
handling  of  the  contents.  No  discussion  of  stores  prob- 
lems could  be  considered  comjjlete  without  reference 
o  some  of  these.  It  would  be  manifestly  impossible 
to  describe,  or  even  mention,  all  the  good  things  there 
are  on  the  market  at  the  disposal  of  and  suitable  for 
storeroom  use.  In  calling  attention  to  a  few  of  them, 
therefore.  It  is  not  intended  to  discriminate  against 
other  appliances  of  equal  merit  and  usefulness 

The  Counting  Problem-Con.paratively  few  things 
that  are  handled  in  bulk  in  factories  are  varied  in 
size  weight,  or  character.  Consequently  the  great 
problem  is  one  of  counting,  with  the  least  expendi- 


340 


PURCHASING  AND  STORING 


ture  of  time  and  labor,  the  masses  of  things  which 
come  in  like  units,  or  in  units  which  vary  so  slightly 
in  weight  and  size  that  the  variations  can  be  neutral- 
ized on  a  bulk  machine  count. 

As  a  rule  the  hand-counter  in  an  industrial  estab- 
lishment makes  a  mark  with  a  pencil  as  he  or  she 
finishes  a  hundred.  Thus  in  hand-counting,  there  are 
usually  three  distinctly  different  operations:  the 
hand  operation,  the  mind  operation,  and  the  pencil 
operation.  Now  suppose  that  just  as  a  worker  is 
about  to  put  down  a  *' hundred"  mark,  his  attention 
is  distracted  by  a  loud  noise  or  by  someone  speaking 
to  him.  When  his  mind  returns  to  the  task  in  hand 
is  he  likely  to  know  whether  he  has  made,  or  still  has 
to  make,  that  ** hundred"  mark?  Such  instances  are 
frequent,  and  the  almost  invariable  tendency  is  to 
''stay  on  the  safe  side."  The  counters  argue  that  it 
is  better  to  count  out  too  many  than  too  few. 

Does  dependence  on  this  kind  of  accuracy  *'fit" 
with  the  careful  calculations  upon  which  modern 
business  rests? 

When  machine  operators  receive  from  the  stores 
2020  or  2005  each  of  parts  to  be  worked  on,  instead 
of  2000,  the  stipulated  number,  how  can  the  foreman 
know  where  he  is  ''at,"  or  how  can  disputes  be 
avoided  with  piece  workers?  Furthermore,  if  one 
looks  at  it  "in  the  large,"  and  reasons  that  the  effect 
of  each  error  grows  more  harmful  the  longer  it,  or  its 
cause,  remains  unremedied,  how  can  the  superintend- 
ent know  what  is  being  wasted  until  the  magnified 
result  of  some  miscalculation  shows  up  in  serious 
form? 


INTENTIONAL  SECOND  EXPOSURE 


fllll 


r™ 


340 


PURCHASING  AND  STORING 


ture  of  time  and  labor,  the  masses  of  things  which 
come  in  like  units,  or  in  units  which  vary  so  slightly 
in  w^eight  and  size  that  the  variations  can  be  neutral- 
ized on  a  bulk  machine  count. 

As  a  rule  the  hand-counter  in  an  industrial  estab- 
lishment makes  a  mark  with  a  pencil  as  lie  or  she 
finishes  a  hundred.  Thus  in  hand-counting,  there  are 
usually  three  distinctly  different  operations:  the 
hand  operation,  the  mind  operation,  and  the  pencil 
operation.  Now  suppose  that  just  as  a  worker  is 
about  to  put  down  a  '*  hundred '^  mark,  his  attention 
is  distracted  by  a  loud  noise  or  by  someone  speaking 
to  him.  When  his  mind  returns  to  the  task  in  hand 
is  he  likely  to  know  whether  he  has  made,  or  still  has 
to  make,  that  *' hundred"  mark?  Such  instances  are 
frequent,  and  the  almost  invariable  tendc^ncy  is  to 
*'stay  on  the  safe  side."  The  counters  argue  that  it 
is  better  to  count  out  too  many  than  too  few. 

Does  dependence  on  this  kind  of  accuracy  **fit" 
with  the  careful  calculations  upon  which  modern 
business  rests? 

When  machine  operators  receive  from  the  stores 
2020  or  2005  each  of  parts  to  be  worked  on,  instead 
of  2000,  the  stipulated  number,  how  can  t\w  foreman 
know  where  he  is  **at,"  or  how  can  disputes  be 
avoided  with  piece  workers?  Furthermore^,  if  one 
looks  at  it  ''in  the  large,"  and  reasons  that  the  effect 
of  each  error  grows  more  harmful  the  longer  it,  or  its 
cause,  remains  unremedied,  how  can  the  superintend- 
ent know  what  is  being  wasted  until  the  magnified 

result  of  some  miscalculation  shows   up   in  serious 
form? 


u.  O 

Q    O 


P3 


O 


02 

< 


o 


< 


o 


^   Q 


O 


o 
m 

w 
a 
o 

H 


00 
CO 


342 


PURCHASING  AND  STORING 


RECEIVING  AND  STORING 


343 


One  point  is  especially  worthy  of  mention,  and  it 
may  well  be  emphasized  here:  The  actual  work  of 
production,  dominantly  important  though  it  is,  has 
absorbed  more  than  its  share  of  serious  attention  and 
has  thereby  overshadowed  many  contributory  prob- 
lems, such  as  the  counting  of  parts,  stock,  and  ma- 
terial— operations  which  furnish  abundant  oppor- 
tunities for  leaks  and  losses. 

Next  in  importance  to  the  inaccuracy  and  lessened 
efficiency  caused  by  unnatural  mindstrains,  are  the 
expenditure  of  time  and  labor.  It  is  evident  that  if 
a  man  counts  1000  small  articles  by  fives,  he  performs 
200  separate  and  physical  and  mental  operations.  If 
the  articles  are  so  large  that  he  must  count  by  twos, 
then  500  physical  and  a  similar  number  of  mental 
operations  must  be  performed.  A  conservative  esti- 
mate, therefore,  places  the  average  handcount  ratio 
of  the  minimum  number  of  operations  to  the  number 
of  articles  to  be  counted  at  one  manual  and  one 
mental  operation  to  each  count  of  five  pieces. 

Counting  Methods. — All  counting  methods  now  in 
use,  logically  divide  themselves  into  five  divisions,  or 
separate  systems  including  hand-counting.  Eliminat- 
ing the  hand  counting,  the  use  of  which  is  only  permis- 
sible for  very  small  quantities,  the  four  remaining 
systems  can  best  be  described  under  the  name  of  the 
type  of  equipment  used,  thus  we  have  the  '*  weighing 
and  estimating  method,"  the  **even  balance  scale,'' 
the  ** proportional  scale,"  and  the  '* counting  scale" 
or  '* counting  machine"  as  it  is  generally  known. 

The  expressions  ** counting  by  weight"  or  **by  the 
pound"  are  often  used  to  explain  mechanical  count- 


ing, but  they  are  not  altogether  correct.  '*  Counting 
bv  balance"  is  more  accurate  because  all  devices  that 
count,  while  more  or  less  highly  developed  forms  of 
scales,  operate  on  the  principle  which  says  that  an 
object  placed  at  the  end  of  a  lever  will  balance  two 
of  the  same  objects  at  the  other  end,  provided  the 
lever  is  pivoted  at  the  right  point.  Indeed  with  the 
exception  of  the  weighing  and  estimating  method  of 
counting,  in  which  the  known  weight  is  a  necessary 
factor,  the  most  modern  systems  of  mechanical 
ci)unting  are  not  dependent  on  the  know^n  weight  of 
the  objects  handled  at  any  stage  of  the  operation. 
The  only  thing  required  in  that  respect  is  that  these 
objects  be  in  weight  units  suitable  to  the  ratio  capa- 
city of  the  counting  device  employed. 

To  gauge  the  efficiency  of  the  different  methods 
of  counting  by  balance,  it  is  advisable  to  remember 
that  industrial  counting  is  divided  into  two  kinds 
of  tasks.  One  is  the  counting,  or  measuring  out,  of 
stated  quantities  for  disbursement  to  departments  or 
machine  operators.  The  other  is  the  determination 
of  how  many  things  there  are  in  bulk  lots  of  un- 
known quantities.  This  requirement  provides  the 
severest  test  of  mechanical  counting  efficiency. 

AYith  these  points  clearly  in  mind,  the  differences 
between  the  various  methods  can  be  more  clearly 
explained  and  will  be  taken  up  according  to  the 
order  of  their  generally  accepted  efficiency. 

Weighing  and  Estimating.— This  method  of  count- 
ing represents  the  first  step  between  hand  counting 
and  the  use  of  a  machine  made  specifically  for  the 
purpose     It  is  still  in  use  to  some  extent. 


344 


PURCHASING  AND  STORING 


In  using  the  weighing  and  estimating  method,  the 
weight  of  a  given  number  of  the  articles  to  be 
counted— preferably  an  even  number  for  the  sake  of 
quick  calculation— is  first  obtained,  usually  on  a 
regular  weighing  scale.  If  200  articles  of  uniform 
size  and  weight,  for  instance,  weigh  three  pounds, 
then  exactly  twelve  pounds  of  the  same  pieces  must 
contain  a  total  of  800  pieces.     (See  Figure  69.) 

Greater  speed  and  fewer  operations  are  the  ad- 
vantages of  this  method  over  hand-counting,  but  it 
still  invites  inaccuracies  from  mental  computation.  It 
is  also  doubtful  if  the  common  insensitiveness  of  a 
scale  made  simply  for  weighing  ever  permits  much 
greater  accuracy  when  used  for  counting.  Very  few 
weighing  scales  of  any  considerable  capacity  can  be 
compared  with  mechanical  counting  devices  as  to 
sensitivenes.  And  the  degree  of  sensitiveness  is  the 
chief  factor  in  determining  the  efficiency  of  a  machine 
that  counts  by  balance.  The  least  hesitation  of  one 
of  these  devices  in  responding  when  the  burden  on 
the  platform  is  increased  or  decreased  is  a  flaw  in  the 
accuracy  of  the  machine.  Exceedingly  quick  re- 
sponse of  a  high  grade  counting-by-balance  device, 
technically  termed  a  *' sensitive  break,"  is  absolutdy 
necessary  to  accuracy. 

Even  Balance  Scale.— This  system  of  counting  also 
represents  one  of  the  earlier  attempts  to  improve  on 
hand-counting  by  means  of  a  mechanical  device. 

To  count  out  2,000  articles  with  an  even  balance 
scale,  500  articles,  for  instance,  are  first  counted  out 
by  hand  and  placed  on  a  tray  or  receptacle  on  one 
side  of  the  balance,  or  scale.     By  putting  an  equal 


INTENTIONAL  SECOND  EXPOSURE 


344 


PURCHASING  AND  STORINO 


411 


t 

1 

< 

1 

In  using  the  weighing  and  estimating  method,  the 
weight  of  a  given  number  of  the  aiticles  to  be 
counted— preferably  an  even  number  for  the  sake  of 
quick  calculation— is  first  obtained,  usually  on  a 
regular  weighing  scale.  If  200  articles  of  unifoi'in 
size  and  weight,  for  instance,  weigh  three  pounds, 
then  exactly  twelve  pounds  of  the  same  pieces  must 
contain  a  total  of  800  pieces.     (See  Figure  69.) 

Greater  speed  and  fewer  operations  are  the  ad- 
vantages of  this  method  over  hand-counting,  but  it 
still  invites  inaccuracies  from  mental  computation.  It 
is  also  doubtful  if  the  common  insensitiveness  of  a 
scale  made  simply  for  weighing  ever  permits  much 
greater  accuracy  when  used  for  counting.  Very  few 
weighing  scales  of  any  considerable  capacity  can  be 
compared  with  mechanical  counting  devices  as  to 
sensitivenes.  And  the  degree  of  sensitiveness  is  the 
chief  factor  in  determining  the  efficiency  of  a  machine 
that  counts  by  balance.  The  least  hesitation  of  one 
of  these  devices  in  responding  when  the  burden  on 
the  platform  is  increased  or  decreased  is  a  flaw  in  the 
accuracy  of  the  machine.  Exceedingly  quick  re- 
sponse of  a  high  grade  counting-by-balance  device, 
technically  termed  a  ** sensitive  break,"  is  absolutely 
necessary  to  accuracv. 

Even  Balance  Scale.— This  system  of  counting  also 
represents  one  of  the  earlier  attempts  to  improve  on 
hand-counting  by  means  of  a  mechanical  device. 

To  count  out  2,000  articles  with  an  even  })alance 
scale,  500  articles,  for  instance,  are  first  counted  out 
by  hand  and  placed  on  a  tray  or  receptacle  on  one 
side  of  the  balance,  or  scale.    By  putting  an  equal 


# 


346 


PURCHASING  AND  STORING 


RECEIVING  AND  STORING 


347 


Itiill 


quantity  of  these  articles  on  the  opposite  tray  an 
even  balance  is  struck,  of  course;  and,  if  the  orig- 
inal or  base,  hand-count  was  correct,  tlie  balance 
scale  holds  1,000  pieces.  Then  the  five  hundred 
pieces  on  one  side  are  put  with  the  five  hundred 
on  the  other  and  enough  pieces  put  on  the  empty 
tray  to  balance  the  scale  again,  making  a  total  of 
2,000. 

To  count  a  bulk-lot  of  unknown  content  by  this 
method,  it  is  first  necessary  to  count  by  hand  a  **'base 
number"  lot — as  described  above — which  may  be 
100  or  500  articles,  depending  on  the  size  of  the  lot 
to  be  counted.  Then  a  series  of  balances  are  made, 
as  in  the  first  described  use  of  this  scale,  until  the 
remainder  is  too  small  to  create  a  balance,  when  the 
hand  method  is  again  employed. 

Proportional  Scales.— Proportional  scales  are  made 
to  work  according  to  certain  set  even  ratios;  and  the 
ratios  usually  range  from  10  to  1  up  to  200  to  1.  A 
scoop  hangs  from  the  end  of  the  scale  beam,  serving 
as  the  counter-poise.  On  the  10  to  1  scale,  one  hun< 
dred  small  pieces  in  the  counter-poise  scoop  will  bal- 
ance  1,000  similar  pieces  on  the  platform. 

To  count  the  contents  of  unknown  bulk  lots  with 
this  scale,  the  material  to  be  counted  is  put  on  the 
platform,  while  enough  pieces  are  put  in  the  counter- 
poise scoop  to  bring  the  beam  to  a  *'low  balance.'' 
Then  a  single  piece  is  removed  from  the  scoop,  giv- 
ing a  **high  balance."  Next,  enough  pieces  are 
taken  from  the  platform  to  make  a  perfect  balance. 
The  total  of  the  pieces  removed  from  the  platform 
is  added  to  the  total  of  pieces  on  the  platform,  which 


total  has  been  determined  by  multiplying  the  ratio  of 
the  machine  by  the  number  of  pieces  in  the  counter- 
poise scoop. 

To  count  out  a  specified  number  of  pieces  with  the 
proportional  scale,  a  number  of  pieces  are  placed  in 
the  counter-poise,  in  number  equal  to  1/10,  1/50,  or 
1/200  of  the  total  quantity  to  be  counted,  the  pro- 
portion depending,  of  course,  upon  the  set  ratio 
capacity  of  the  scale  in  use.  The  platform  is  then 
burdened  with  a  load  of  pieces  sufficient  to  bring  the 
beam  to  the  perfect  balance  point.  Without  further 
adjustment  of  beam  or  counter-poise  scoop,  it  is  then 
possible  to  count  out  as  many  lots  as  desired  by 
simply  repeating  the  process  of  loading  the  platform 
to  the  balancing  point.  These  scales  can  also  be  used 
for  the  purpose  of  weighing  material  as  well  as  for 
counting.    (See  Figures  69  and  70.) 

Counting  Machines. — The  counting  machine,  which 
retains  the  form  of  a  scale,  has  reduced  the  process 
of  mechanical  counting  to  the  point  where,  with  the 
exception  of  the  comparatively  small  hand  count 
necessary  to  provide  the  ratio  number  necessary  to 
operate,  all  mental  computations  have  been  elimi- 
nated. The  results  are  secured  almost  automatically 
and  the  total  counts  are  indicated  in  plain  figures  on 
graduated  counting  bars,  which  are  attached  to  the 
beam.  These  machines  have  the  usual  small  scoop  to 
take  the  ratio  count  of  pieces,  but  this  scoop  or  ratio 
pan,  slides  along  the  counting  bar  instead  of  resting 
in  fixed  position  on  the  counter-poise. 

Counting  machines  are  made  in  a  great  variety  of 
sizes  and  capacities  from  the  delicate  machines.  Fig- 


348 


PURCHASING  AND  STORING 


RECEIVING  AND  STORING 


349 


I 


ures  71  and  72,  which  count  25,000  pi(»ces  to  the 
ounce,  up  to  machines  of  heavy  dormant  type,  Fig- 
ure 73,  which  counts  tons  of  heavier  piec(»s. 

To  obtain  the  count  of  an  unknown  quantity  of 
pieces  with  the  counting  machine,  the  tare  of  the 
package  or  contents  is  first  set  out  on  one  or  the 
weighing  beams,  of  which  there  are  usually  two. 
From  the  contents  of  the  package  the  number  of 
pi«ces  required  for  the  ratio  pan  are  taken  out,  the 
number  required  for  this  purpose  is  indicated  on  the 
counting  bar.  The  ratio  pan  is  then  move<l  along  the 
counting  bar  until  the  beam  is  in  balance.  A  pointer 
immediately  above  the  ratio  pan  then  indicates  on 
the  counting  bar  the  exact  number  of  pieces  resting 
on  the  platform. 

When  it  is  desired  to  count  in  certain  specified 
lots,  say  500,  the  tare  of  the  package  is  set  out  as 
above  indicated,  the  pointer  is  set  against  the  500 
mark  on  the  beam,  and  the  package  is  then  loaded 
until  the  beam  balances. 

There  is  assuredly  no  room  for  comparison  as  to 
simplicity,  speed,  or  automatically  certain  accuracy 
between  the  few  simple  mental  and  manual  oper- 
ations required  by  the  ** balance"  method  and  the 
old,  primitive,  hand-method,  which  requires  scores, 
hundreds,  or  thousands,  of  time-and-energy-consum- 
ing  motions. 

It  is  obvious  that  a  succession  of  hundreds  or  thou- 
sands of  similar  acts  is  purely  mechanical,  and  that 
the  use  of  machinery,  wherever  economically  possible, 
is  a  conservation  of  time  and  energy.  Why  should 
we  have  adding  machines  in  the  office  and  no  me- 


PIGS.  71,   72,   AND  73.      COUNTING  AND   WEIGHING   MACHINES 


350 


PURCHASING  AND  STORING 


EECEIVING  AND  STORING 


351 


chanical  counting  devices  in  the  plant?  Each  is  an 
application  of  the  science  of  mathematics  to  the  solu- 
tion of  a  problem  of  obtaining  a  maximum  saving  of 
time,  and  mental  and  physical  energy  by  means  of  a 
short  cut. 

A  true  short  cut  of  this  sort  eliminates  the  use  of 
the  human  brain  as  a  mechanical  recorder—and  frees 
It  for  far  more  useful  work.  The  general  morale  of 
workers  as  a  whole  has  been  greatly  improved  sine,, 
machines  were  made  to  relieve  the  mind  of  monoton- 
ous tasks.  A  general  great  improvement  in  efficiency 
means  greater  profits. 

Weighing  Methods.— Inaccurate  and  careless  weigh- 
mg  IS  inexcusable  in  an  industrial  establishment.    It 
IS  inexcusable  anywhere,   for  that  matter,   for  if  a 
recorded    weight   is    not    correct    nothing    has    been 
gained,  except  perhaps  a  vague  idea  of  the  weight. 
But  such  approximations  cannot  be  tolerated  in  a 
factory  turning  out   small   parts.     Suppose^   for   in- 
stance, a  storeroom  issues  one  thousand   pounds  of 
brass  rod  to  be  used  for  making  a  screw  machine 
product.     If  five  thousand  finished  pieces  are  pro- 
duced from  this  quantity,  an  exact  calculation  can  be 
made  of  the  amount  of  metal  in  each  finished  unit 
as  well  as  the  scrap.     But  if  the  storeroom  scales 
were  incorrect  to  the  extent  of  only  ten  pounds  plus 
or   minus   the   one   thousand   pounds,   accurate    cost 
keepirs'  would  be  impossible.     Such  a  condition  re- 
peated from  time  to  time  over  a  year  would  show 
radical  discrepancies  somewhere. 

Correct  weighing  is  a  fundamental  of  the  highest 
importance   in    deterinining    the    efficiency   of    oper- 


ations, and  anything  short  of  accuracy  is  positively 
harmful.  Too  little  attention  has  been  paid  to  pro- 
curing scales  of  the  proper  type  for  the  various  kinds 
of  materials  handled  in  the  storeroom.  The  preva- 
lent custom  has  been  to  send  a  requisition  to  the  pur- 
chasing agent  to  buy  a  bench  scale  or  a  platform 
scale,  as  the  case  may  be.  Quotations  would  be  ob- 
tained and  orders  placed  in  much  the  same  manner 
as  similar  transactions  for  brooms  or  shovels.  The 
failure  to  recognize  the  vital  importance  of  scales  in 
the  operation  of  a  manufacturing  plant  cannot  be 
wholly  charged  to  the  purchasing  agent,  for  it  is  the 
production  department  that  has  the  largest  interest 
in  securing  the  right  kind  of  scales.* 

These  instruments  should  be  selected  with  just  as 
much  care  as  a  new  lathe  or  drill.  The  mechanical 
construction  should  be  suitable  for  the  uses  to  which 
they  are  to  be  put,  and  periodical  inspection  and  test- 
ing should  be  insisted  upon.  The  mechanical  engi- 
neering and  maintenance  work  of  every  industrial 
plant  should  include  all  weighing  apparatus.  To 
neglect  these  while  at  the  same  time  making  strenu- 
ous efforts  to  secure  greater  efficiency  from  the  ma- 
chines and  tools  on  which  the  material  is  used,  does 
not  afford  any  guarantee  that  the  paper  results  rep- 
resent the  true  state  of  affairs. 

Many  instances  could  be  cited  of  bad  weighing 
methods,  but  beyond  the  emphasis  they  would  add 
to  the  argument  against  such  practices  they  would  be 

*  The  attention  of  the  reader  is  caUed  to  the  remarkable  series 
of  articles  on  Industrial  Scales  and  Weighing  Meth(Kls,  by  Herbert 
T.  Wade,  that  appeared  in  Industrial  Management,  Vols.  LII,  and 
LIII. 


352 


PURCHASING  AND  STORING 


without  purpose.  A  little  thought  given  to  the  mat- 
ter cannot  fail  to  convince  anyone  of  the  fundamental 
necessity  for  accuracy.  To  secure  this,  careful  selec- 
tion must  be  made  in  the  first  place,  and  continued 
care  and  attention  given  to  the  maintenance  of  all 
scales  in  use,  with  proper  tests  and  inspection.  Wait- 
ing until  some  flagrant  fault  or  actual  failure  de- 
velops may  mean  that  registering  has  been  incorrect 
for  an  indefinite  period. 

Scale  manufacturers  have  developed  their  product 
to  a  point  where  they  can  furnish  practically  any- 
thing demanded  by  the  exigencies  of  any  situation 
needing  accurate  weight  records.  It  rests  mainly 
with  the  user  to  specify  the  conditions  under  which 
the  instrument  is  to  be  used,  and  not  simi)ly  go  into 
the  market  and  buy,  without  investigation,  the  cheap- 
est scale  that  has  the  required  capacity.  Often  scales 
can  be  bought  with  the  provision  that  they  will  be 
given  regular  inspection  and  test.  Better  methods  in 
industrial  plants  require  quality,  not  cheapness,  and 
this  engenders  accuracy  and  efficiency. 

Trucking  Material.— The  scientific  handling  of  ma- 
terial in  every  industry  has  not  received  sufficient  at- 
tention. Until  the  elevating  truck  was  introduced, 
practically  the  only  known  means  of  transporting 
material  on  the  floor  was  the  box  or  fixed-platform 
type  of  truck.  The  separation  of  the  running  gear 
from  the  platform  has  revolutionized  transportation 
in  stores. 

While  the  old  style  of  platform  truck  must  still  be 
used  for  moving  certain  goods  in  a  stor(»room,  the 
main  reliance  to-day  is  placed  on  the  lifting  or  ele- 


INTENTIONAL  SECOND  EXPOSURE 


II 


m 
m 


i 


352 


PURCHASING  AND  STORING 


without  purpose.  A  little  thought  given  to  the  mat- 
ter cannot  fail  to  convince  anyone  of  the  fundamental 
necessity  for  accuracy.  To  secure  this,  careful  selec- 
tion must  be  made  in  the  first  place,  and  continued 
care  and  attention  given  to  the  maintenance  of  all 
scales  in  use,  with  proper  tests  and  inspection.  Wait- 
ing until  some  flagrant  fault  or  actual  failure  de- 
velops may  mean  that  registering  has  been  incorrect 
for  an  indefinite  period. 

Scale  manufacturers  have  developed  th(4r  product 
to  a  point  where  they  can  furnish  practically  any- 
thing demanded  by  the  exigencies  of  anv  situation 
needmg  accurate  weight  records.  It  rests  mainly 
with  the  user  to  specify  the  conditions  under  which 
the  instrument  is  to  be  used,  and  not  simi)ly  go  into 
the  market  and  buy,  witTiout  investigation,  the  cheap- 
est scale  that  has  the  required  capacity.  Often  scales 
can  be  bought  with  the  provision  that  they  will  be 
given  regular  inspection  and  test.  Better  methods  in 
industrial  plants  require  quality,  not  cheapness,  and 
this  engenders  accuracy  and  efficiency. 

Trucking  Material.— The  scientific  handling  of  ma- 
terial in  every  industry  has  not  received  sufficient  at- 
tention. Until  the  elevating  truck  was  introduced, 
practically  the  only  known  means  of  transporting 
material  on  the  floor  was  the  box  or  fixed-platform 
type  of  truck.  The  separation  of  the  running  gear 
from  the  platform  has  revolutionized  transportation 
in  stores. 

While  the  old  style  of  platform  truck  must  still  be 
used  for  moving  certain  goods  in  a  storeroom,  the 
main  reliance  to-day  is  placed  on  the  lifting  or  ele- 


ir 


354 


PURCHASING  AND  STORING 


>  I 


vatmg  type  of  truck  with  the  multiple  platform  sys- 
tem. These  trucks  can  be  obtained  to  cairy  loads  of 
any  weight  likely  to  be  handled  in  the  ordinary  in- 
dustrial storeroom.  They  can  be  arranged  so  "that 
the  platforms  have  sufficient  clearance  for  any  floor 
conditions,  and  can  negotiate  any  grades  which  can 
be  mounted  by  an  ordinary  truck. 

There  are  many  types  of  these  trucks  in  use,  and 
while  the  construction  of  the  steel  frame  and  liftin- 
mechanism  varies  to  some  extent  the  principle  is  the 
same  in  all  of  them.  The  platforms  are  simple  and 
inexpensive,  and  a  large  number  of  them  can  be  kept 
on  hand.  When  not  in  use  they  are  nested  and 
stacked,  thereby  occupying  little  floor  space.  One 
big  advantage  of  these  platforms  in  a  storeroom  is 
that  raw  material  of  some  kinds  can  remain  on  the 
platform,  saving  the  unloading  and  stacking  when 
the  material  comes  in  and  the  reloading  on  the  truck 
when  delivering  from  stores. 

Some  material  of  this  character  can  be  stacked  in 
two  or  three. tiers.  If  it  is  necessary  to  get  out  the 
back  tier  first,  it  can  easily  be  done  by  running  the 
lift  truck  under  the  first  and  second  tier  platforms, 
pull  them  out,  and  have  ready  access  to  the  rearmost 
tier  at  any  point  desired. 

Each  platform  really  becomes  a  truck  as  soon  as 
the  transporting  mechanism  is  run  under  it.  This 
•enables  the  receipt  of  material  into  stores  to  be 
greatly  facilitated,  because  as  many  platforms  as 
may  be  necessary  can  be  loaded  at  the  receiving  point 
and  moved  immediately  to  their  respective  places  in 
the  storeroom.    It  is  not  necessary  to  unload  these  at 


INTENTIONAL  SECOND  EXPOSURE 


mi 


:: 


■A 

I 


354 


PURCHASING  AND  STORING 


vatmg  type  of  truck  with  the  multiple  platform  sys- 
tem. These  trucks  can  be  obtained  to  cai-iy  loads  of 
any  weight  likely  to  be  handled  in  the  ordinary  in- 
dustrial storeroom.  They  can  be  arranged  so  'that 
the  platforms  have  sufficient  clearance  for  any  floor 
conditions,  and  can  negotiate  any  grades  which  can 
be  mounted  by  an  ordinary  truck. 

There  are  many  types  of  these  trucks  in  use,  and 
while  the  construction  of  the  steel  frame  and  liftin.- 
mechanism  varies  to  some  extent  the  principle  is  iC 
same  in  all  of  them.  The  platforms  are  simple  and 
inexpensive,  and  a  large  number  of  them  can  be  kepi 
on  hand.  When  not  in  use  they  are  ii(;sted  and 
stacked,  thereby  occupying  little  floor  space.  One 
big  advantage  of  these  platforms  in  a  storeroom  is 
that  raw  material  of  some  kinds  can  remain  on  the 
platform,  saving  the  unloading  and  stacking  when 
the  material  comes  in  and  the  reloading  on  the  truck 
when  delivering  from  stores. 

Some  material  of  this  character  can  be  stacked  in 
two  or  three  tiers.  If  it  is  necessary  to  get  out  the 
back  tier  first,  it  can  easily  be  done  by  running  the 
lift  truck  under  the  first  and  second  tier  platforms, 
pull  them  out,  and  have  ready  access  to  the  rearmost 
tier  at  any  point  desired. 

Each  platform  really  becomes  a  truck  as  soon  as 
the  transporting  mechanism  is  run  under  it  This 
•enables  the  receipt  of  material  into  stores  to  be 
greatly  facilitated,  because  as  many  platforms  as 
may  be  necessary  can  be  loaded  at  the  reeeiviu"-  point 
and  moved  immediately  to  their  respective  places  in 
the  storeroom.    It  is  not  necessary  to  unload  these  at 


% 


356 


PURCHASING  AND  STORING 


once  and  place  the  articles  in  bins  or  on  shelves,  as 
the  platforms  can  remain  where  placed  until  suffi- 
cient help  is  at  liberty  to  do  the  work.  This  greatly 
reduces  the  amount  of  labor  required  by  the  old 
trucking  system,  where  the  truck  was  run  backwards 
and  forwards,  dumping  the  material  on  the  floor,  or 
causing  delays  by  holding  the  truck  while  unloading 
and  stacking  goods. 

The  use  of  this  system  in  transporting  goods  in  the 
stores  has  many  advantages.  It  cuts  down  the  initial 
expenditure  for  equipment;  it  reduces  the  labor  item 
considerably;  much  time  is  saved,  because  the  unload- 
ing and  re-loading  of  material  may  be  eliminated; 
much  of  the  floor  space  occupied  by  the  old  style 
truck  is  saved.  Also,  as  the  goods  are  not  handled  so 
much  the  risk  of  loss  by  damage  is  reduced.  Ami, 
finally,  the  trucking  system  is  quicker  and  more 
flexible.  If  a  storeroom  is  receiving  castings  or  any 
article  which  will  ultimately  go  into  the  shop  in 
quantities  of  100,  500,  or  any  other  number,  they  can 
be  placed  on  the  truck  platforms  in  these  quantities 
and  no  re-counting  or  handling  is  necessary.  They 
can  then  be  delivered  to  the  production  department 
at  a  moment's  notice  by  simply  running  a  truck 
under  the  platform.  In  some  stores  the  raw  material 
can  be  very  largely  handled  in  this  way  on  much  the 
same  principle  as  the  use  of  tote  boxes.  In  fact,  the 
platforms  can  be  arranged  as  tote  boxes  if  advisable. 

Lift  trucks  built  for  heavy  duty  are  lowered  grad- 
ually and  effectually  by  a  hydraulic  check.  For  oper- 
ating in  large  areas  they  can  be  equipped  with  elec- 
tric drive.    The  head  and  front  wheels  are  so  placed 


INTENTIONAL  SECOND  EXPOSURE 


•■  ft 


356 


PURCHASING  AND  STORING 


once  and  place  the  articles  in  bins  or  on  shelves,  as 
the  platforms  can  remain  where  placed  until  suffi- 
cient help  is  at  liberty  to  do  the  work.  This  greatly 
reduces  the  amount  of  labor  required  liy  the  old 
trucking  system,  where  the  truck  was  run  backwards 
and  forwards,  dumping  the  material  on  Ihe  floor,  or 
causing  delays  by  holding  the  truck  while  unloading 
and  stacking  goods. 

The  use  of  this  system  in  transporting  goods  in  thft 
stores  has  many  advantages.    It  cuts  down  the  initial 
expenditure  for  equipment;  it  reduces  the  labor  item 
considerably;  much  time  is  saved,  because  the  unload- 
ing and  re-loading  of  material  may  be  eliminated; 
much  of  the  floor  space  occupied   by  the  old   style 
truck  is  saved.    Also,  as  the  goods  are  not  handled  so 
much  the  risk  of  loss  by  damage  is  reducted.     And, 
finally,   the    trucking   system   is   quicker    and   morij 
flexible.    If  a  storeroom  is  receiving  castings  or  any 
article   which   will   ultimately   go   into    tlie   shop   in 
quantities  of  100,  500,  or  any  other  number,  they  can 
be  placed  on  the  truck  platforms  in  these  quantiticF 
and  no  re-counting  or  handling  is  necessary.     The> 
can  then  be  delivered  to  the  production  department 
at   a  moment's   notice   by   simply   running   a   truck 
under  the  platform.    In  some  stores  the  raw  material 
can  be  very  largely  handled  in  this  way  on  much  thi 
same  principle  as  the  use  of  tote  boxes.    In  fac^t,  th( 
platforms  can  be  arranged  as  tote  boxes  if  advisable. 

Lift  trucks  built  for  heavy  duty  are  lowered  grad- 
ually and  effectually  by  a  hydraulic  check.    For  oper- 
ating in  large  areas  they  can  be  equipped  with  elec 
trie  drive.     The  head  and  front  wiieels  are  so  placed 


358 


PURCHASING  AND  STORING 


as  to  turn  a  complete  cycle,  enabling  the  truck  to 
operate  in  its  own  length  in  narrow  aisles. 

Figure  76  shows  a  further  development  in  elevat- 
ing trucks,  on  which  a  scale  is  mounted  so  that  ma- 
terial loaded  on  the  platform  may  be  weighed  (grosH, 
net  and  tare  weights  can  be  quickly  determined)  and 
when  transported  wherever  desired  without  rehand- 
ling.  When  transporting  material  the  loaded  plat- 
form is  supported  on  a  special  set  of  side  bars,  so 
that  there  is  no  strain  on  the  scale  mechanism. 

Conveyors.--The  layout  of  a  plant  should  provide 
for  a  location  for  the  storeroom  in  clos(*  proximity 
to  the  receiving  department.  There  may  be  condi- 
tions where  this  is  impossible,  and  in  those  cases 
where  a  number  of  subsidiary  storerooms  are  main- 
tained in  separate  buildings,  it  is,  of  course,  not  feas- 
ible to  have  them  adjacent  to  each  other.  Hand 
trucking  may  not  prove  the  best  means  of  transport- 
ing material  in  such  instances,  and  it  becomes  neces- 
sary to  use  self  propelled  trucks  or  some  kind  of 
conveyor. 

The  very  large  size  of  many  industrial  plants,  the 
great  amount  of  ground  space  occupied,  and  the 
necessity  of  hauling  vast  quantities  of  material  havt' 
resulted  in  the  installation  of  various  typ(is  of  con- 
veying equipment  to  make  possible  the  rapid  trans- 
portation  of  parts  from  one  building  or  one  section 
of  the  plant  to  another.  The  use  of  conveyors  for 
this  purpose  keeps  the  manufacturing  operations  in 
progress  without  delays  and  reduces  the  cost  of 
handling  the  goods  to  a  minimum. 

As  there  are  so  many  types  of  conveyors,  and  as 


FIGS.  77  AND  78.      RECEIVING  GOODS  BY  ROLLER  CONVEYERS 

Bolls  of  paper,  above,  delivered  to  the  basement  storeroom  of  the 

Empire  Paper  Tube  and  Box  Co.,  N.  Y.     Below,  goods  received  into 

the  stores  of  Endicott,  Johnson  &  Co.,  Binghamton.         359 


INTENTIONAL  SECOND  EXPOSURE 


It 


m^M'^ 


358 


PURCHASING  AND  STORING 


as  to  turn  a  complete  cycle,  enabling  the  truck  to 
operate  in  its  own  length  in  narrow  aisles. 

Figure  76  shows  a  further  development  in  elevat- 
ing trucks,  on  which  a  scale  is  mounted  so  that  ma- 
terial loaded  on  the  platform  may  be  weighed  (gross, 
net  and  tare  weights  can  be  quickly  determined)  antl 
when  transported  wherever  desired  without  rehand- 
ling.  When  transporting  material  the  loaded  plat- 
form is  supported  on  a  special  set  of  side  bars,  so 
that  there  is  no  strain  on  the  scale  mechanism. 

Conveyors.— The  layout  of  a  plant  should  provide 
for  a  location  for  the  storeroom  in  close  proximity 
to  the  receiving  department.  There  may  be  condi- 
tions where  this  is  impossible,  and  in  those  cases 
where  a  number  of  subsidiary  storerooms  are  main- 
tained in  separate  buildings,  it  is,  of  course,  not  feas- 
ible to  have  them  adjacent  to  each  other.  Hand 
trucking  may  not  prove  the  best  means  of  transport- 
ing material  in  such  instances,  and  it  becomes  neces- 
sary to  use  self  propelled  trucks  or  soukj  kind  of 
conveyor. 

The  very  large  size  of  many  industrial  plants,  the 
great  amount  of  ground  space  occupied,  and  the 
necessity  of  hauling  vast  quantities  of  matc^rial  have 
resulted  in  the  installation  of  various  types  of  con- 
veying equipment  to  make  possible  the  rajnd  trans- 
portation of  parts  from  one  l)uilding  or  one  section 
of  the  plant  to  another.  The  use  of  conveyors  for 
this  purpose  keeps  the  manufacturing  operations  in 
progress  without  delays  and  reduces  the  cost  of 
handling  the  goods  to  a  minimum. 

As  there  are  so  many  types  of  conveyors,  and  as 


FIGS.  77  AND  78.      RECEIVING  GOODS  BY  ROLLER   CONVEYERS 

Rolls  of  paper,  above,  delivered  to  the  basement  storeroom  of  the 

Empire  Paper  Tube  and  Box  Co.,  N.  Y.     Below,  jroods  received  into 

the  stores  of  Endicott,  Johnson  «&  Co.,  Bin^iiamton.         359 


360 


PURCHASING  AND  STORING 


nearly  all  types  can  be  arranged  for  variations  in  lo- 
cation changed  in  construction  to  suit  tlu*  character 
of  the  material  to  be  conveyed,  any  detailed  discus- 
sion of  the  various  problems  met  with  in  storeroom 
practice  is  out  of  the  question  here. 

Engineers  and  managers  of  industrial  plants  have 
of  late  been  devoting  considerable  attention  to  the 
possibilities  of  harnessing  the  force  of  gravity  to 
solve  their  trucking  problems.  Gravity  is  always 
ready  to  operate  on  the  instant,  twenty-four  hours  a 
day,  three  hundred  and  sixty-five  days  in  the  year, 
without  attention. 

Wherever  large  quantities  of  regular  objects  are 
to  be  moved  in  a  fairly  steady  stream  from  floor  to 
floor  downward,  or  from  one  level  to  a  lower  one  on 
the  same  floor,  some  type  of  gravity  conveyor  usually 
can  be  devised  which  will  handle  the  mat(»rial  rapid- 
ly, economically,  and  with  safety  to  both  goods  and 
workmen. 

Even  for  moving  materials  from  one  point  to  an- 
other on  the  same  level  the  gravity  convt^yor  may  he 
used  when  it  is  combined  with  short  elevating  sec- 
tions operated  by  individual  motors;  for  an  insignifi- 
cant amount  of  electrical  power  suffices  to  raise  tlie 
objects  to  a  position  where  gravity  can  get  in  its 
work,  and  the  long  stretches  of  distance  are  then 
compassed  by  gently  sloping  rollway. 

Conveyors  depending  entirely  on  gravity  naturally 
have  their  limitations,  but  in  locations  where  the  r(^- 
ceiving  room  is  on  the  main  floor  and  the  storeroom 
in  the  basement  they  can  be  adopted  in  preference 
perhaps  to   any  other  type.     There   are  also   cases 


FIG.  79.      COMBINED  ROLLWAY,  SCALES,  AND  CHUTE  IN   THE  FIN- 
ISHED STOCK  ROOM  OF  HOTALING,  WARNER  &  CO.,  SYRACUSE,  N.  Y. 


I 


FIG.  80.      MOVING  STOCK  BY  MEANS  OF  OVERHEAD  BELT  CONVEYOR 
IN  THE  FACTORY  OF  J.  B.  STETSON  CO.,  PHILA. 

361 


INTENTIONAL  SECOND  EXPOSURE 


w  > 


L 


360 


PURCHASING  AND  STORING 


nearly  all  types  can  be  arranged  for  variations  in  lo- 
cation changed  in  construction  to  suit  the  character 
of  the  material  to  be  conveyed,  any  detailed  discus- 
sion of  the  various  problems  met  with  in  storeroom 
practice  is  out  of  the  question  here. 

Engineers  and  managers  of  industrial  plants  have 
of  late  been  devoting  considerable  attention  to  tlio 
possibilities  of  harnessing  the  force  of  gravity  to 
solve  their  trucking  problems.  Gravity  is  always 
ready  to  operate  on  the  instant,  twenty-four  hours  a 
day,  three  hundred  and  sixty-five  days  in  the  year, 
without  attention. 

Wherever  large  quantities  of  regular  objects  are 
to  be  moved  in  a  fairly  steady  stream  from  floor  to 
floor  downward,  or  from  one  level  to  a  lower  one  on 
the  same  floor,  some  type  of  gravity  conveyor  usually 
can  be  devised  which  will  handle  the  material  rapid- 
ly, economically,  and  with  safety  to  both  goods  and 
workmen. 

Even  for  moving  materials  from  one  point  to  an- 
other on  the  same  level  the  gravity  conveyor  may  he 
used  when  it  is  combined  with  short  elevating  sec- 
tions operated  by  individual  motors;  for  an  insigniii- 
cant  amount  of  electrical  power  suffices  to  raise  tlie 
objects  to  a  position  where  gravity  can  get  in  its 
work,  and  the  long  stretches  of  distance  are  then 
compassed  by  gently  sloping  rollway. 

Conveyors  depending  entirely  on  gravity  naturally 
have  their  limitations,  but  in  locations  where  the  re- 
ceiving room  is  on  the  main  floor  and  the  storeroom 
in  the  basement  they  can  be  adopted  in  preferene<^ 
perhaps  to   any  other  type.     There   are   also   cases 


FIG.  79.      COMBINED  ROLLWAY,  SCALES,  AND  CHUTE  IN   THE  FIN 
ISHED  STOCK  ROOM  OF  HOTALING,  WARNER  &  CO.,  SYRACUSE,  N.  Y 


PIG.  80.      MOVING  STOCK  BY  MEANS  OF  OVERHEAD  BELT  CONVEYOR 
IN  THE  FACTORY  OF  J.  B.  STETSON  CO.,  PHILA. 

361 


362 


PURCHASING  AND   STORING 


where  a  central  storeroom  has  been  locattnl  at  a  suffi- 
cient  height  in  one  of  the  buildings  so  that  all  raw 
materials  are  elevated  to  such  central  stores  and  dis- 
tributed by  gravity  to  the  various  departments  of  the 
plant,  thereby  eliminating  subsidiary  storerooms. 

One  of  the  greatest  advantages  of  the  gravity  roller 
conveyor  system  is  its  flexibility.  By  means  of 
curves,  switches,  chutes,  elevators,  and  other  appli- 
ances the  conveyors  may  be  run  around  corners, 
through  partitions  and  floors,  and  may  be  laid  out 
practically  wherever  desired.  Under  the  most  favor- 
able conditions  these  conveyors  will  carry  pa€kages 
with  a  smooth  surface  on  a  grade  of  only  two  and 
one-half  per  cent,  but  ordinarily  a  grade  of  at  least 
four  per  cent  is  advisable. 

The  uses  of  belt  conveyors  are  so  varied  that  there 
is  hardly  any  problem  involving  the  conveying  of 
light  parts  or  materials,  over  short  or  long  distances, 
that  cannot  be  solved  by  some  form  of  moving  belt! 
Even  pneumatic  conveyors  and  carriers  are  used  to 
good  advantage  in  many  industrial  establishments, 
and  none  of  these  methods  should  be  overlooked  in 
considering  the  transportation  problems. 

Sectional  Steel  Bins  and  Shelving:.— An  office  with- 
out  correspondence  files  would  be  helpless;  yet,  un- 
noticed,  many  supposedly  well-equipped  factories  are 
rendered  just  as  helpless  through  lack  of  efficient 
storage  methods.  Were  the  value  of  every  square 
foot  of  storage  space  determined  and  the  stock  con- 
sidered as  so  many  bins  of  pennies,  nickels,  and 
dimes,  instead  of  rivets,  nuts,  and  washers,  the  neces- 
sity of  proper  care  would  be  quite  evident. 


FIGS.    81    AND    82.       METAL    BINS    IN    THE    STOREROOM    OF    THE 
PACKARD   MOTOR  CAR  CO.,  ABOVE;   AND  IN   THE  BUICK 

MOTOR  CAR  CO.,  BELOW 
3G3 


364 


PURCHASING  AND  STORING 


Steel  equipment  for  storage  purposes  is  of  many 
types.  Small  and  valuable  articles  may  be  kept  in 
lockers,  and  exceptionally  heavy  material  mav  need 
special  construction,  but  generally  speaking  i^ost  of 
the  material  kept  in  bins  or  racks  can  be  stored  in 
either  the  closed  type,  the  open  type,  or  the  rack, 
type  of  receptacle. 

These  can  all  be  obtained  in  the  unit  system  of 
construction  which  provides  for  ample  flexibility  in 
length,  width  and  depth.  The  3-inch  vertical  ad- 
justment of  shelves  and  the  approximately  (i-inch 
horizontal  adjustment  of  dividers  permits  the  great- 
est economy  in  available  storage  space.  This  adjust- 
able feature  affords  a  saving  of  25  to  30  per  cent  in 
storage  space  when  compared  with  the  construction 
of  the  ordinary  wood  bins  and  shelving.  Further- 
more, the  simplicity  of  the  construction  permits  easy 
erection  by  an  ordinary  workman,  the  only  tool  neces- 
sary being  a  screw  driver.  Another  important  point 
is  that  construction  of  this  kind  is  a  fire  retardant. 
iNo  building  can  be  consider<'d  completely  fireproof 
when  It  is  equipped  with  combustible  wood  bins  and 
shelving. 

The  Closed  Type.-The  construction  of  the  closed 
type  Figure  83,  consists,  first  of  flat  steel  backs 
which  extend  the  entire  height  and  length  of  the  as- 
semblies. One  back  is  necessary  for  each  nnit  and 
acts  either  as  a  back  to  a  single  face  assembly  or 
as  a  dividing  wall  in  a  double  face  assembly.  The 
uprights  are  attached  at  right  angles  to  the  back 
with  stove  bolts  through  holes  in  a  back  flange  and 
corresponding  holes  in  the  backs.    The  uprights  and 


FIG.    83.      CLOSED  TYPES   OF   METAL  BINS 


365 


366 


PURCHASING  AND  STORING 


•« 


backs  are  all  punched  for  the  attachment  of  shelves. 
The  shelves  are  connected  by  means  of  stove  bolts 
through  holes  in  the  side  and  back  flanges.  Thus,  the 
uprights  and  backs  each  carry  a  portion  of  the  shelf 
load. 

The  standard  bin  construction  is  such  that  an  as- 
sembly of  plain  shelving  can  be  made  into  a  bin  con- 
struction by  simply  attaching  a  bin-front  in  connec- 
tion with  the  front  face  of  the  shelf.  The  bin-front 
and  the  shelves,  being  bolted  to  the  frame,  tie  the 
entire  construction  together.  This  provides  absolut<. 
rigidity,  but  does  not  prevent  easy  removal  of  an  en- 
tire bin,  nor  the  quick  adjustment  of  the  shelves.  A 
3-ineh  vertical  adjustment  is  used  which  provides 
sufficient  range  for  any  storage  space  desired. 

Open  Shelving.— This  type  of  construction,  Figur.. 
84  has  a  continuous  opening  through  the  assembly, 
and  IS  used  when  requirements  call  for  the  storage  ol' 
a  material  which  is  to  be  handled  from  cither  side 
Both  faces  are  alike,  and  the  design  is  such  that  th. 
complete  assembly  is  self-anchoring.  The  uprights 
are  formed  from  one  piece  of  sheet  steel,  the  front 
face  of  which  is  punched  with  holes  for  3-inch  adjust- 
ment of  shelves. 

The  shelf  is  formed  from  one  piece  of  sheet  steel 
with  edges  turned  on  four  sides.  The  front  face  of 
each  shelf  is  attached  to  the  face  of  the  uj)right  with 
four  bolts.  This  arrangement  acts  as  a  knee  brace 
and  provides  for  lateral  thrust.  In  other  words,  each 
shelf  IS  so  designed  that  when  attached  it  adds  to  the 
stiffness  of  the  entire  assembly  and  thus  effects  a 
perfectly  rigid  construction. 


368 


PURCHASING  AND  STORING 


RECEIVING  AND  STORING 


369 


ItH 


11 


As  shown  by  the  illustration,  the  shelving  is  biiill 
on  the  unit  principle  and  is  simply  made  up  of  up- 
rights and  shelves. 

A  bin  construction  can  be  made  up  if  desired  by  at- 
taching  bin  boards  to  the  face  of  the  uprights  and 
along  the  front  of  the  shelf  by  the  use  of  stove  bolts. 
Card  holders  can  be  attached  to  the  faces  of  tho 
shelves  by  inserting  prongs  through  the  slotted  holes. 

Racks.— The  rack  type  of  construction,  as  shown  in 
Figure  86,  is  adaptable  for  the  storage  of  Babbitt 
metal,  spelter,  drill  rods,  and  so  on,  and  is  generally 
used  m  conection  with  the  storage  of  dies,  molds,  pat- 
terns, cores,  etc. 

It  is  composed  of  heavy  gauge  formed  sheet  steel 
uprights  and  a  rack  shelf  attached  to  the  uprights 
by  means  of  stove  bolts.  The  manner  of  attaching 
makes  the  rack  self-anchoring.  In  the  illustration 
the  ends  of  the  front  face  of  the  shelf  are  flat.  This 
part  acts  as  a  small  knee  brace  which,  when  attached 
to  the  upright,  provides  for  lateral  thrust.  Each 
shelf  contains  four  of  these  knee  braces,  and,  there- 
fore, every  shelf  adds  to  the  rigidity  of  the  entire 
construction. 

The  front  face  of  each  shelf  is  punched  with  slotted 
holes  for  the  purpose  of  attaching  card  holders.  The 
uprights  are  all  punched  for  the  vertical  adjustment 
of  shelves. 

The  stock  rack  shown  in  Figure  87  is  designed  for 
the  convenient  and  economical  storage  of  rods  and 
bars  of  steel,  brass,  etc.  It  is  made  in  two  styles— 
the  single-hook,  or  wall  pattern,  and  the  double-book 
type.     Both  styles  are  furnished  in  sevenil  lengths 


for  stock  of  varyinig  lengths.  The  unit  idea  is  carried 
out  in  the  construction,  so  that  the  rack  can  be  ex- 
panded or  contracted  to  meet  changing  requirements. 
The  rack  can  be  easily  and  completely  knocked  down 
when  it  is  desired  to  re-locate  it  in  another  part  of 
the  storeroom. 

Hooks  and  tension  bolts  are  of  steel,  the  material 
best  suited  to  withstand  the  combined  bending  and 
tensile  stresses,  while  cast  iron  distance  pieces  of 
twice  the  crushing  strength  of  steel  sustain  the  com- 
pression due  to  load.  The  roll-up  on  the  end  of  the 
hooks  is  important  as  it  prevents  the  load  from  spill- 
ing off.  It  is  impossible  to  overload  the  rack,  and 
the  entire  space  between  hooks  may  be  filled  without 
causing  undue  stress. 

Spaces  are  provided  to  accommodate  a  large  vari- 
ety of  sizes  without  unduly  mixing  them.  This  elimi- 
nates the  necessity  of  handling  a  great  variety  of 
stock  before  getting  the  desired  size.  End  hauling 
of  bars  is  eliminated  and  no  valuable  floor  space  is 
wasted  thereby.  The  graduation  in  length  of  hooks — 
long  at  the  bottom  and  short  at  the  top — materially 
facilitates  the  removal  of  stock  vertically  where  hoist 
and  runway  service  is  employed. 

The  wall  pattern  type,  as  shown  in  Figure  88,  as 
its  name  would  indicate,  is  designed  to  be  placed 
against  the  wall  and  is  particularly  adapted  for  use 
where  floor  space  is  limited.  Pans  may  be  provided 
with  either  type  of  rack  between  the  uprights  for  ac- 
commodating pieces  not  long  enough  to  reach  be- 
tween the  posts.  Several  lengths  of  pans  may  be 
used    to    obtain    varying    distances    between    posts. 


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372 


PUHCHASING  AND  STORING 


Open  Air  Storage. — The  preceding  discussion  has 
been  confined  to  interior  storage  facilities,  but  a 
storekeeper  in  some  establishments  has  under  his 
charge  large  quantities  of  materials,  which  are  not 
kept  under  lock  and  key  or  are  not  stori^i  in  ware- 
houses, such  as  have  been  described.  In  foundry 
work,  for  instance,  there  would  be  coke,  pig  iron,  and 
scrap  iron.  In  the  case  of  the  pig  iron,  the  yard 
should  be  arranged  with  stalls  open  at  one  end,  or 
partitions  only  can  be  used  sufficiently  far  apart  to 
accommodate  one  carload  in  each  compartment.  Two 
or  three  of  the  pigs  should  have  the  car  number 
painted  on  them  as  a  means  of  identification  should 
there  be  any  trouble  with  the  metal,  either  in  its 
use  in  the  foundry  or  when  analyzed. 

With  a  travelling  crane  and  magnet  it  is  possible 
to  keep  pig  iron  and  scrap  in  any  kind  of  enclosure. 
It  also  enables  all  shipments  to  be  segregated.  The 
material  can  be  stored  in  less  space  than  when  in 
loose,  untidy,  straggling  heaps,  and  certainly  it  is 
under  much  better  control. 

It  is  sometimes  necessary  to  keep  several  kinds  of 
foundry  sand,  if  both  brass  and  iron  castings  are 
made,  both  for  machine  molding  and  floor  molding. 
Open  covered  sheds  properly  subdivided  should  be 
arranged  for  this  material.  Fire  clay  also  should  be 
stored  in  a  similar  way.  The  latter  is  not  so  suscep- 
tible to  deterioration  by  exposure,  but  the  sand 
should  have  protection  from  the  weather,  as  should 
also  limestone  and  sea  coal.  All  materials  of  this 
nature  should  be  under  rigid  control.  There  is  abso- 
lutely no  reason  why  stores  of  this  character  should 


RECEIVING  AND  STORING 


373 


not  be  subject  to  accurate  record,  but  too  often  no 
records,  or  only  remotely  approximate  ones,  are  kept. 

When  large  quantities  of  structural  steel  are  used, 
it  is,  of  course,  not  practicable  to  store  it  in  the  same 
building  or  in  the  same  manner  as  small  articles,  and 
it  may  be  necessary  to  detail  one  of  the  stores  clerks 
to  keep  track  of  this  material.  An  ideal  arrange- 
ment is  for  the  cars  to  be  unloaded  at  one  side  of 
the  building,  the  bars,  angles,  channels,  and  beams 
stacked  in  regular  order  according  to  size,  and  stock 
should  be  drawn  from  the  opposite  end  of  the  stack. 
As  such  supplies  usually  pass  directly  to  the  saw 
bench,  very  little  work  is  necessary  in  keeping  a 
record  as  the  cuts  are  made. 

Intensive  Storing. — Using  storage  intensively  and, 
at  the  same  time,  avoiding  overcrowding  or  placing 
one  class  of  material  where  it  interferes  with  the  free 
movement  of  another  class,  is  a  problem  to  tax  the 
ingenuity  of  any  storekeeper.  In  any  discussion  of 
equipment  used  in  industrial  storerooms,  the  subject 
can  only  be  treated  in  a  general  way,  unless  one  were 
to  recite  instances  of  unusual  problems  which  have 
been  overcome  by  some  storekeepers.  These  prob- 
lems are  individual,  and  solutions  have  to  be  found 
to  meet  the  special  conditions.  A  visit  made  to  the 
storerooms  of  almost  any  large  industrial  plant  will 
afford  a  demonstration  of  some  clever  device  to  solve 
intensive  storing. 

It  is  common  practice  nowadays  to  use  ^^s  for 
some  articles,  instead  of  placing  them  in  "bins  or 
racks.  Wall  space  which  could  not  be  utilized  other- 
wise is  made  to  serve  a  purpose.    Some  of  these  ar- 


374 


PURCHASING  AND  STORING 


RECEIVING  AND  STORING 


375 


tides,  and  also  some  of  tliose  in  bins,  whieli  are 
drawn  from  stores  in  regular  specific  quantities  are 
tied  or  bundled  in  these  quantities.  Thi^  saves  de- 
lay in  counting  or  weighing  when  the  articles  are 
requisitioned,  and  the  material  can  be  handed  out 
without  loss  of  time  to  anybody. 

In  a  large  plant  where  steel  billets  are  us(^d,  the 
former  custom  was  to  dump  them  in  hea])s,  until  the 
storekeeper  evolved  the  plan  of  unloading  them  onto 
platforms  which  are  stacked  on  top  of  each  other  by 
a  crane.  When  it  becomes  necessary  to  use  the  bil- 
lets, the  platforms  are  lifted  by  the  crane  onto  self- 
propelled  trucks  and  are  transported  to  the  rolling 
mill.  This  eliminates  several  handlings  over  the  old 
method  and  economizes  space. 

Such  mechanical  aids  as  barrel  stackers  and  sack 
stackers  are  utilized  to  good  purpose  in  many  store- 
rooms, but  it  is  still  possible  to  see  four  or  five  men 
struggling  with  barrels  filled  with  heavy  material  en- 
deavoring to  stack  them  without  the  aid  of  theso 
appliances.  Seventy-five  per  cent  of  this  hibor  could 
be  saved  by  using  the  mechanical  stackers. 

When  an  inventory  of  materials  is  taken,  an  in- 
ventory  should  also  be  taken  of  the  non-productive 
labor  used  in  receiving  and  storing  the  materials. 
Simply  because  a  storeroom  is  devoted  mainly  to 
heavy  materials  it  does  not  always  follow  that  it  is 
necessary  to  have  brawny  men  to  handle  it.  There 
are  so  many  mechanical  appliances  to-day  that  physi- 
cal strength  in  the  human  being  is,  by  reason  of 
them,  largely  equalized.  The  majority  of  men  who 
labor   with   their   hands   are   not   willingly   mentally 


idle.  They  would  just  as  soon  work  with  their  brains, 
but  intensive,  strenuous,  mechanical,  monotonous 
work  dulls  thinking.  Sometimes  a  laborer,  however, 
will  work  with  his  brain  as  well  as  his  hands  and 
produce  a  method  of  relieving  the  physical  strain. 
There  is  ample  room  for  this  in  some  of  the  store- 
room operations. 


CHAPTER  XVIII 
STORES  INVExNTORIES 

Perpetual  versus  Periodic  Inventories. -A  short 
time  ago  a  prominent  technical  journal  d(' voted  con- 
siderable space  to  a  discussion  of  stores  inventories. 
The  principal  argument  advanced  was  that  it  is  ad- 
visable to  omit  the  regular  annual  or  semi-annual 
inventory.  Many  opinions  have  been  advanced  from 
time  to  time  on  this  subject,  and  as  inventorying  is 
a  matter  of  vital  interest  to  good  stores  keeping  and 
as  many  misconceptions  exist,  it  is  essential  to  eluci- 
date  the  various  points. 

A  logical  reason  for  the  discontinuance  of  the  prac- 
tice of  taking  physical  inventories  at  periodic  inter- 
vals of  material  and  supplies  in  the  stores,  would  be 
that  the  perpetual  inventory  represented  the  actual 
quantities  on  hand,  or  that  it  was  so  nearly  accurate 
as  to  make  the  difference  negligible  betwc^en  the  ac- 
tual quantities  and  recorded  quantities.  It  is  im- 
portant that  the  perpetual  inventory  should  indicate 
the  true  state  of  affairs,  or  should  come  as  near  it  as 
possible,  for  all  the  stores  clerical  work  revolves 
around  it.  It  is  the  stores  ledger;  and  tlni  account 
kept  with  each  customer  in  the  sales  ledger  of  a  con- 
cern should  not  be  more  accurate  than  the  account 
kept  in  the  perpetual  inventory  of  the  debits  and 
credits  entered  against  each  stores  account. 

376 


STORES  INVENTORIES 


377 


There  are  still  to  be  found  some  manufacturers 
who  keep  no  daily  records,  or  perpetual  inventory  as 
it  is  called,  of  material  on  hand.  They  have  some 
method  of  keeping  track  of  material  used  in  produc- 
tion work,  and  annually  close  the  establishment  for 
inventory  purposes,  at  which  time  a  general  physical 
inventory  is  taken.  In  olden  days  such  methods  may 
have  passed  muster,  but  they  cannot  be  tolerated 
under  even  ordinary  conditions  to-day.  In  intensive 
manufacturing  they  would  be  impossible,  and  nothing 
can  be  said  in  support  of  them. 

On  the  other  hand,  some  manufacturers  claim  to 
have  developed  the  perpetual  inventory  to  such  a 
high  state  of  perfection  that  it  is  unnecessary  to  take 
any  physical  inventory.  Let  us  examine  the  ad- 
vantages claimed  by  the  adherent's  of  this  system. 

The  Perpetual  Inventory.— This  gives  complete  de- 
tailed information  monthly,  weekly,  daily,  or  even 
hourly,  if  necessary,  of  the  state  of  the  material  on 
hand,  the  rate  of  consumption,  and  the  many  valuable 
features  essential  in  the  exercise  of  purchasing  and 
storekeeping  which  have  been  covered  in  previous 
chapters.  These  features  alone  would  indicate  that  a 
perpetual  inventory  is  imperative. 

A  continuing  ever-ready  record  being  essential,  the 
question  which  presents  itself  is,  whether  this  record 
can  be  brought  to  such  a  state  of  accuracy  and  per- 
fection that  periodic  physical  inventories  can  be  dis- 
pensed with. 

In  some  manufacturing  plants  this  has  been  done, 
and  many  advantages  and  savings  are  claimed  for  the 
innovation. 


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STORES  INVENTORIES 


379 


Instead  of  closing  down  the  plant  for  several  days 
or  a  week  to  take  the  physical  inventory,  a  balance 
is  struck  of  all  stores  inventory  accounts  in  exactly 
the  same  way  and  at  exactly  the  same  time  that  bal- 
ances are  taken  of  accounts  payable  and  accounts 
receivable. 

One  of  the  principal  advantages  claimed  is  that  it 
eliminates  the  closing  down  of  a  plant  and  throw- 
ing out  of  employment  hundreds,  and  perhaps  thou- 
sands of  workmen,  involving  them  in  a  loss  of  ap- 
proximately two  per  cent  of  their  annual  income  or 
earning  capacity;  while  at  the  same  time  plant  ex- 
pense goes  on — for  rent,  interest,  insurance  and  simi- 
lar charges  do  not  cease  while  the  physical  inventory 
is  being  taken.  The  salary  of  every  person  engaged 
in  the  inventory  work  while  production  is  stopped 
is  a  dead  loss;  for  it  cannot  be  distributed  as  a  bur- 
den on  the  factory  product,  because  nothing  is  being 

produced. 

Another  argument  put  forward  for  abolishing  the 
physical  inventory,  is  that  it  is  more  likely  to  be  in- 
accurate than  the  perpetual  records,  because  the 
counting,  weighing,  measuring,  and  so  forth,  of  the 
large  quantities  is  very  liable  to  be  incorrect.  This 
work  is  frequently  performed  under  the  pressure 
of  time.  The  persons  engaged  on  annual  inventories 
often  work  long  hours,  and  generally  amid  consider- 
able confusion  which  is  apt  to  cause  many  errors. 

Those  advocating  the  elimination  of  the  physical 
inventory  state  that  in  actual  practice  a  comparison 
of  the  actual  results  has  showed  several  discrepancies 
between  the  annual  and  perpetual  inventories,   but 


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382 


PURCHASING  AND  STORING 


on  re-counting  the  perpetual  inventory  was  found  to 
be  correct  in  ninety  per  cent  of  the  instances.  More- 
over, the  total  discrepancies  between  the  two  inven- 
tories was  less  than  $800  in  a  store  on  which  the 
valuation  was  placed  at  nearly  three  quarters  of  a 
million  dollars.  This  difference,  of  course,  does  not 
warrant  the  expense  incurred  in  taking  the  annual 
physical  inventory. 

It  is  a  practice  of  some  concerns  to  s(?t  aside  an 
amount  every  year-  for  the  purpose  of  inventory  ad- 
justment. This  is  done  in  much  the  same  manner  as 
a  reserve  for  bad  debts.  Such  a  fund  may  never  be 
called  upon,  but  it  is  good  sound  business  policy. 
Any  such  policy  is  equally  applicable  to  any  kind  of 
inventory,  hence  it  is  not  an  argument  for  or  against 
a  perpetual  inventory. 

Perpetual  inventory  figures,  the  advocates  claim, 
are  more  reliable  than  those  of  a  physical  inventory, 
unless  the  latter  are  checked  by  duplicate?  counting' 
weighing,  and  so  on.  If  such  a  course  is  used,  it 
amounts  to  practically  the  same  as  taking  two 'in- 
ventories. But  if  the  reliability  of  an  annual  inven- 
tory is  dependent  solely  on  one  count  or  weighing, 
taken  perhaps  hurriedly,  it  is  better  to  compile  the 
annual  statement  of  stores  on  hand  from  perpetual 
inventory  balances. 

Finally  by  keeping  the  storeroom  clean,  by  regu- 
larity and  order  in  arrangement,  by  careful  methods 
in  receiving  goods  into  and  delivering  them  out  of 
stores,  the  perpetual  inventory  if  rightly  planned  for 
the  character  of  the  stores,  can  be  brought  to  a  high 
state  of  accuracy. 


STORES  INVENTORIES 


383 


The  Physical  Inventory.— The  advocates  of  an  an- 
nual or  semi-annual  physical  inventory  claim  that 
it  is  absolutely  necessary  to  use  it  as  a  check  on 
the  perpetual  inventory  which  has  been  running  for 
a  period  of  six  months  or  a  year,  as  the  case  may  be, 
without  any  positive  check.  During  this  period  there 
may  have  been  hundreds  or  thousands  of  entries  to 
one  account,  and  it  is  not  to  be  supposed  that  this 
amount  of  book-keeping  can  be  done  without  errors, 
some  of  which  might  be  serious. 

It  is  claimed  that  closing  down  for  a  period  of 
about  one  week  every  year  is  a  necessity  in  many 
manufacturing  establishments— for  repairs,  altera- 
tions, replacements,  etc.— and  that  such  work  can  be 
done  much  better  and  more  economically  when  the 


USED  iq. 

JAN. 

FEB 

MAR 

APR 

MAY 

JUNE 

JULY 

AUG 

SEPT.. 

OCT 

NOV 

DEC 

TOTAL , 


PAST  ODNSUMPTION 

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JAN 

FEB 

MAR 

APR 


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JAN 

FEB 

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APR 


MAY : MAY... 

JUNE JUNE... 

JULY JULY... 

AUG.... AUG.... 

SEPT SEPT. . . 

OCT OCT.... 

NOV NOV.... 

DEC DEC... 

TOTAL TOTAL. 


J 


PIG.  94.      REVERSE  OF  FIGURE  93,  SHOWING  METHOD  OF  RECORD- 
ING PAST  CONSUMPTION 


I 


384 


PURCHASING  AND  STORING 


workmen  are  not  around.  Even  if  there  is  no  work 
of  this  character  to  be  done,  it  is  considered  advis- 
able to  close  down  for  a  short  period  in  llie  summer, 
when  many  workmen  are  asking  for  vacations.  These 
vacations  can  then  be  disposed  of  practically  all  at 
one  time,  and  a  physical  inventory  taken  in  the  work- 
men's absence. 

Again,  there  are  certain  items  used  in  manufactur- 
ing in  reference  to  which  a  perpetual  inv(3ntory  can 
never  be  very  accurate.  Bulk  material,  such  as  sand, 
coal,  fireclay,  scrap  iron,  and  so  on,  cannot  be  as 
correctly  determined  as  regards  their  incomings  and 
outgoings.  For  these  it  is  imperative  that  physical 
particulars  should  be  ascertained  to  enable  calcula- 
tion to  be  made  for  an  inventory  of  any  kind. 

Furthermore,  knowing  that  at  a  regular  date  a 
physical  inventory  will  be  made,  induces  care  in 
keeping  the  perpetual  inventory.  If  this  check  were 
discarded,  the  clerks  keeping  the  perpetual  inventory 
would  be  inclined  to  carelessness,  and  no  great  re- 
liance could  be  placed  on  its  accuracy.  It  is  also 
claimed  that  the  physical  inventory  has  a  *' house- 
cleaning"  value,  in  that  it  brings  to  light  some  ma- 
terial  or  articles  which  have  been  placed  in  the  wrong 
bins  or  receptacles. 

Finally,  for  legal  reasons  a  physical  inventory  is 
advocated,  because  if  it  was  ever  necessary  to  go  into 
court,  a  perpetual  inventory  would  be  ridiculed  as 
a  true  statement  of  affairs. 

Ideal  Inventorying.— The  foregoing  remarks  cover 
the  principal  pros  and  cons  put  forth  in  respect  to 
keeping  stores  records  by  the  advocates  of  both  sya- 


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386 


PURCHASING  AND  STORING 


STORES  INVENTORIES 


387 


terns.  The  ideal  inventory,  in  my  opinion,  is  un- 
doubtedly  the  perpetual  record,  posted  promptly, 
maintained  accurately  and  absolutely  reliable.  So 
accurate  should  it  be  that  one  can  walk  to  any  bin 
or  rack  and  find  there  the  exact  quantity  of  material 
shown  at  that  time  on  the  inventory  records. 

Infallibility  is  an  impossibility  while  the  human 
factor  has  to  be  considered,  and  it  is  not  to  be  ex- 
pected that  the  many  thousands  of  clerical  entries 
on  the  records,  and  the  corresponding  number  ol* 
manual  operations  in  receiving  and  delivering  the 
goods,  can  be  accomplished  without  error.  If  this 
could  be  done,  we  should  have  the  ideal  record,  show- 
ing always  the  exact  state  of  every  stores  account. 

The  manner  in  which  stores  records  are  compiled 
and  the  documents  from  which  they  are  written  up 
do  not  as  a  rule  permit  of  such  accuracy  as  the 
entries  made  in  the  ledger  accounts  with  debtors  and 
creditors,  yet  no  accountant  would  think  of  taking 
as  correct  the  items  posted  to  these  accounts  without 
the  check  of  a  regular  trial  l)alance.  It  is  essential, 
therefore,  that  the  perpetual  inventory  be  also  sub- 
ject to  some  kind  of  check.  While  it  may  be  possible 
that  manufacturers  of  certain  articles  have  found  it 
possible  to  eliminate  the  semi-annual  or  annual  physi- 
cal inventory,  it  is  probably  because  the  nature  of  the 
product  manufactured  does  not  call  for  a  very  large 
variety  of  raw  material,  or  it  is  such  material  that 
accurate  records  of  it  can  be  maintained  with  com- 
paratively  few  clerical  entries. 

The  question  of  the  losses  sustained  by  closing  a 
manufacturing   establishment   for   a   few  days   or   a 


week,  in  order  to  take  a  physical  inventory,  is  a 
matter  for  individual  consideration.  It  is  possible 
that  some  plants  have  quiet  periods  when  no  loss 
would  be  incurred  by  closing  down,  and  at  such  times 
a  physical  inventory  could  be  taken.  These  dull 
periods  usually  come  around  midsummer  or  toward 
the  end  of  the  year,  when  books  are  generally 
balanced;  but  even  if  this  is  not  so  there  is  no  in- 
superable objection  to  a  general  inventory  being 
taken  at  any  time  of  the  y^ar  that  is  convenient.  A 
physical  inventory  is  really  a  check  on  the  perpetual 
inventory,  and  if  there  is  any  discrepancy  between 
the  two,  what  is  going  to  be  done  about  it!  The 
cost  accountant  has  not  compiled  his  records  from 
the  physical  inventory  but  from  the  same  documents 
that  have  been  used  in  writing  up  the  perpetual 
records,  so  that  from  certain  viewpoints  it  is  im- 
material whether  an  inventory  is  taken,  or  not. 

The  legal  reasons  which  are  said  to  exist  for  tak- 
ing a  physical  inventory  at  the  same  time  that  the 
financial  balance  sheet  of  a  concern  is  made  up,  do 
not  exist  in  fact  but  only  in  imagination.  If  proper 
perpetual  records  are  kept,  and  the  documents  pre- 
served which  were  used  for  compiling  the  records, 
then  these  are  just  as  good  evidence  as  the  books 
showing  the  debits  and  credits  with  customers. 

It  has  been  shown  that  the  necessity  exists  for 
checking  the  stores  book-keeping  with  the  actual 
stores  contents,  and  that  it  may  be  done  by  regular 
periodic  physical  coimt,  providing  it  does  not  entail 
a  loss  of  profitable  productivity.  To  produce  at  a 
profit  is  what  a  manufacturing  establishment  exists 


388 


PURCHASING  AND  STORING 


for.    To  suspend  this  function  by  closing  down  oper- 
ations could  not  be  considered  as  good  policy. 

The  alternative  to  a  periodical  inventory  is  to 
check  the  clerical  records  by  a  physical  method  at 
convenient  times,  when  it  will  not  disturb  production. 
In  establishments  of  sufficient  magnitude  it  is  pos- 
sible that  the  men  engaged  in  inspecting  raw  mate- 
rial on  arrival  or  similar  work  in  the  shop  could  be 
assigned  to  this  work,  if  it  is  desired  to  have  some 
one  not  actually  taking  part  in  the  manual  operations 
of  the  stores.  This  is  some  protection  against  collu- 
sion, but  it  may  be  found  that  the  regulai*  employees 
of  the  stores  can  be  relied  upon  to  take  the  physical 
inventory  at  such  times  as  they  are  not  fully  occupied 
with  the  routine  work. 

By  following  this  practice  closely,  and  covering  all 
of  the  stores  within  certain  prescribed  pmods,  the 
clerical  records  will  not  go  very  far  wrong  without 
the  discrepancies  being  quickly  discovered.  Other 
requisites  in  inventorying  are  a  clean  storeroom,  well 
kept  and  well  arranged  bins  and  receptacles,  and 
careful,  accurate,  but  alert  help  in  both  manual  and 
clerical  operations. 

Posting  Values  on  Stores  Inventory.— It  is  not  a 
general  practice  for  the  records  kept  in  the  stores  to 
cover  the  value  of  the  stock,  but  this  is  sometimes 
found  advisable,  especially  in  smaller  concerns,  and 
an  illustration  of  a  concise  method  of  doing  this  is 
shown  in  Figure  96.  In  connection  with  the  value 
of  raw  material  and  the  pricing  of  it  for  cost  pur- 
poses there  is  some  difference  of  opinion  in  the  dis- 
position of  cases  where  prices  vary. 


STORES  INVENTORIES 


389 


Article. 


-Size. 


.Bin  No.. 


Description 
Unit 


.Max.. 


.Min.. 


Verified 


ORDERED 


Order  No. 


Quantity 


RECEIPTS  &  DELIVERIES 


Date  or 
Req'n  No. 


Quantity 


BALANCE 


Amount 


1 


Quantity 


Annount 


UNIT 
PRICE 


FIG.  96.      INVENTORY  SHEET  FOR  rSE  WHEN  ENTRIES  ARE  NOT 

NUMEROUS 
The  receipts  should  be  posted  in  red  inli,  and  added  to  the  previous 

balance. 

For  example,  let  lis  assume  that  100  units  are 
received  into  the  stores  at  20  cents  each,  and  40  are 
issued  to  the  shop,  leaving  a  balance  of  60.  An 
additional  quantity  of  80  is  then  received  into  the 
stores  at  a  price  of  25  cents  each,  making  a  balance 
in  the  bins  of  140.  When  further  issues  are  made 
to  the  shop,  at  what  price  should  they  be  charged 
out? 


390 


PURCHASING  AND  STORING 


STORES  INVENTORIES 


391 


It  is  a  practice  of  some  establishments  to  average 
the  price  as  soon  as  there  is  any  change.  In  the 
example  given  above  with  140  units  in  the  stores, 
there  would  be  60  at  20  cents  and  80  at  25  cents,  or 
an  average  price  of  22.8  cents.  Is  it  correct  or  good 
practice  to  use  the  average  price  for  the  next  delivery 
from  the  stores? 

If  25  cents  each  represents  the  lowest  market  price, 
then  the  quantity  on  hand  before  the  last  shipment 
was  received  has  appreciated  5  cents  in  value.  Some 
concerns  would  charge  them  out  of  the  stores  at  the 
advanced  figure,  but  such  practice  may  be  dismissed 
without  discussion.  It  is  not  a  correct  method  for 
figuring  production  costs;  and  in  so  far  as  the  stores 
account  itself  is  concerned,  it  would  simply  mean 
that  this  account  w^ould  show  either  a  profit  or  a  loss 
according  to  market  fluctuations.  As  already  pointed 
out  this  is  not  good  policy. 

Those  who  advocate  that  stores  prices  be  averaged, 
argue  that  it  is  better  to  have  one  price  apply  on  all 
material  in  the  stores  of  one  kind,  it  simplifies  the 
price,  it  is  less  liable  to  lead  to  mistakes,  and  it  ren- 
ders the  calculations  connected  with  the  annual  or 
semi-annual  balancing  much  easier. 

The  best  practice,  however,  is  to  charge  out  the 
hundred  units  at  a  price  of  20  cents  and  the  follow- 
ing 80  at  25  cents.  The  theory  is  that  all  articles  are 
taken  from  the  bottom  of  the  bin  and  that  the 
material  which  has  been  longest  in  the  stores  should 
be  used  prior  to  later  receipts.  There  is  another  and 
more  important  reason  for  this  method  of  procedure. 
An  order  may  be  accepted  from  a  customer,  or  e 


NUMBER 

P.BCLASS 

BILL'G 

PRICE 

PLATE                                 INV  CLASS            SELL  C 

PRICE 

MAX                 1 

MAX 
MIN  ' 

MAX                    1 

MAX 

MIN 

Mm 

DATE 

IN 

OUT 

8AL 

OAIE 

IN 

OUT 

BAL 

DATE 

IN 

OUT 

BAL 

DATE 

IN 

OUT 

BAL 

uoutur 

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wtwfo 

aHOUQHT 

loimtiiD 

itwen' 

roti'n 

1 

roimtui) 

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I- 

fOitm»iiti 

— 1 

FIG.  97.   CARD  FORM  OF  PERPETUAL  INVENTORY 

stock  order  is  issued  for  the  shop,  to  make  up  a 
number  of  finished  parts,  in  either  case  this  is  done 
on  the  basis  of  the  price  of  raw  material  then  in  the 
stores  or  the  price  at  which  it  can  be  bought.  It  is, 
therefore,  only  reasonable  and  fair  that  this  order 
should  be  executed  with  raw  material  priced  on  this 
basis,  and  not  on  an  average  price,  which  may  apply 
on  some  later  order. 

Summary.— The  man  who  knows  most  about  his 
business  seldom  fails,  and  the  one  who  knows  least 
is  usually  the  one  who  does  fail.  Nothing  is  of 
greater  importance  than  a  well  kept  perpetual  in- 
ventory for  advancing  one's  knowledge  of  the  con- 
dition of  that  portion  of  one's  investment  represented 
by  the  stock  of  goods  and  materials  in  the  stores. 

Perpetual  inventories  require  perpetual  attention. 
Cost   authorities   are   practically   united  in  favoring 


h 


392 


PURCHASING  AND  STORING 


them.  The  difficulties  in  handling  them  have  been 
largely  due  to  a  lack  of  attention  on  the  part  of 
employees.  The  benefits  of  maintaining  a  perpetual 
inventory  having  been  discussed,  the  question  of  keep- 
ing accurate  records  can  be  covered  by  some  very 
simple  rules. 

First:  No  material  should  be  received  into  the 
storeroom  without  some  form  of  advice  in  the  shape 
of  receiving  clerk's  report  form  as  shown  in  **C  '' 
Figure  38,  page  240.  These  tickets  or  slips  are  used 
to  make  the  debit  entries.  If  material  is  allowed  to 
pass  into  the  stores  without  some  such  document,  no 
record  might  be  made,  or  if  one  was  it  might  be  in- 
correct. 

Second:  No  material  should  be  allowed  to  leave 
the  stores  without  a  properly  drawn  requisition  which 
must  clearly  indicate  the  quantity  taken  from  stores. 
For  instance,  if  the  stores  inventory  for  a  certain 
article  is  kept  in  units  of  weight  and  the  requisition 
asks  for  a  number  of  the  articles,  it  must  be  (converted 
into  units  of  weight  before  the  articles  leave  the 
stores.  These  documents  are  used  for  making  the 
credit  entries,  and  their  preservation  is  vital. 

Third:  Accuracy  in  posting  entries  is  essential,  as 
also  is  accuracy  in  delivering  the  correct  quantities 
called  for.  Inaccuracies  in  the  latter  function  would 
probably  be  discovered  by  the  recipient  of  the  mate- 
rial, but  the  clerical  work  of  posting  entries  should 
be  checked  daily,  unless  a  check  by  physical  count 
is  made  at  intervals  frequent  enough  to  enable  the 
clerical  entries  to  be  checked  back  should  any  dis- 
crepancies appear. 


STORES  INVENTORIES 


393 


Fourth:  Perpetual  inventories  should  be  treated  as 
cash  is  treated.  Cash  is  verified  often,  or  should  be, 
and  an  inventory  should  also  have  regular  periods 
for  verification. 

Fifth:  The  documents  indicating  the  incomings 
and  outgoings  of  material  pass  into  the  possession  of 
the  cost  department,  but  they  should  be  preserved 
there  a  sufficient  length  of  time  to  cover  the  period 
when  they  may  be  needed  to  check  back;  that  is, 
until  a  physical  count  is  made. 


7 


CHAPTER  XIX 

KECEIVING,  INSPECTING,  AND  STOEING 

Receiving:  Material  at  the  Factory.— In  Chapter 
XVI  it  was  necessary  to  refer  to  the  receipt  of  ma- 
terial and  supplies  purchased  in  order  to  explain  the 
method  of  securing  approval  of  the  invoice,  but  the 
subject  must  be  discussed  more  fully  to  cover  com- 
pletely the  connection  between  the  purchase  of  goods, 
their  arrival  at  the  factory  and  final  disposition. 

Nearly  everything  received  at  a  manufacturing 
establishm'ent  passes  into  the  control  of  tlie  store- 
keeper. In  very  small  concerns  he  may  also  act  as 
receiving  clerk,  or  this  work  may  be  combined  with 
the  shipping  clerk's  functions.  But  in  larger  estab- 
lishments the  receiving  clerk  may  stand  alone,  un- 
attached to  any  department.  This  is  the  preferable 
position,  because  his  duties  are  closely  allied  to  the 
purchasing,  accounting,  and  storekecping  work,  and 
it  is  desirable  for  him  to  be  strictly  neutral  and  not 
to  have  his  movements  controlled  by  any  one  of  these 
departments.  He  can  then  serve  them  all  with  equal 
fairness. 

Many  concerns  refuse  to  permit  the  receiving  clerk 
to  have  a  copy  of  the  order,  thinking  thai,  having 
this  in  his  possession,  it  may  have  a  tendency  to  relax 
his  vigilance.    Not  knowing  the  quantity  ordered  he 

394 


RECEIVING,  INSPECTING,  STORING  395 

would  be  compelled  to  scrutinize  the  incomings  more 
closely,  and  will  get  no  help  in  doing  this,  such  as 
he  might  receive  from  a  copy  of  the  order.  This  is 
a  practice,  however,  which  cannot  be  commended.  If 
the  receiving  clerk  is  lax  in  his  work  and  so  little 
dependence  can  be  placed  upon  him  as  is  implied, 
then  he  is  scarcely  the  man  for  the  job. 

There  are  good  reasons  for  giving  the  receiving 
clerk  a  copy  of  the  order.  In  the  first  place,  in  mak- 
ing his  report,  he  must  identify  each  item  on  his 
receiving  slip  with  an  order  number,  otherwise  the 
purchasing  department  will  be  unable  to  check  the 
receipt  of  material  with  the  order.  Also,  without 
such  a  copy  the  receiving  clerk  will  not  know  to 
which  department  the  goods  belonged.  It  would 
mean  a  great  deal  of  work  to  investigate  these  mat- 
ters after  getting  the  receiving  clerk's  regort.  Fur- 
thermore, lacking  the  information,  the  receiving  clerk 
might  receive  goods  not  ordered  at  all,  or  goods  that 
had  been  cancelled,  or  quantities  in  excess  of  the 
order.  Any  one  of  these  would  be  sufficient  to  tangle 
up  matters  so  badly  that,  if  nothing  worse  happened, 
it  would  mean  a  lot  of  trouble  and  expense  for  the 
purchasing  department  to  straighten  matters  out. 

I  am  firmly  of  the  opinion  that  the  receiving  clerk 
should  have  a  copy  of  the  order,  and  that  he  should 
record  all  receipts  on  a  form  similar  to  Figure  59, 
page  286,  or  on  any  suitable  form  which  would  serve 
the  same  purpose.  It  should  be  in  triplicate.  The 
original  can  go  to  the  purchasing  department,  and 
can,  if  necessary,  be  attached  to  the  invoice.  One 
copy  can  follow  the  goods  to  the  inspector  and  finally 


396 


PURCHASING  AND  STORING 


to  the  storekeeper,  or  if  the  goods  go  direct  to  some 
department  without  passing  through  the  stores  this 
copy  would  still  follow  the  goods.  The  remaining 
copy  stays  with  the  receiving  clerk  and  can  be  filed 
in  a  numerical  sequence  which  should  also  be  in  the 
order  of  dating.  The  order  of  dating  is  the  more 
important,  because  it  is  sometimes  necessary  to  ask 
the  receiving  clerk  questions  regarding  goods  re- 
ceived, and  invariably  the  date  is  used  to  enable  him 
to  look  up  his  records. 

Records  of  Goods  Received.— Figure  38-C,  page 
240,  illustrated  a  method  of  recording  receipt  of  ma- 
terial on  a  copy  of  the  purchase  requisition  and 
Figure  60,  page  287,  showed  a  copy  of  the  purchase 
order  to  be  used  for  the  same  purpose.  If  the  receiv- 
ing clerk  did  not  have  to  keep  any  records  for  his 
own  referqnce  and  could  simi)ly  O.K.  the  copy  of 
requisition  or  the  copy  of  order  and  pass  it  along, 
this  scheme  would  involve  the  least  amount  of  work. 
But  if  he  has  to  keep  records  it  only  means  duplica- 
tion of  some  portion  of  his  work.  Another  bad 
feature  is  that  so  very  often  goods  are  not  received 
exactly  in  accordance  with  the  requisition  and  order. 
They  may  come  in  several  shipments,  which  means 
that  subsidiary  forms  must  be  used  for  recoi-ding  the 
earlier  receipts,  withholding  the  copy  of  requisition 
or  order  until  final  delivery  is  made.  In  actual 
practice  this  is  what  occurs  with  the  use  of  the  form 
shown  in  Figure  60. 

An  illustration  is  given  in  Figure  98  of  a  form  for 
recording  receipt  of  material.  In  this  casci  the  re- 
ceiving clerk  is  under  the  jurisdiction  of  the  purchas- 


RECEIVING,  INSPECTING,  STORING 


397 


I  nS  S-B-IMM 


WARNER    SUGAR    REFINING    COMPANY 

PURCHASING     DEPARTMENT 

EDGEWATER.  N.  A 


.»»- 


We    hMyt    ihb    day    recewed    in    good    coodidoo    good*    at    called    loc    «    «he 
foOowing    requisitioiu    and    order*. 


Signed- 


Req.  No. 


Order  No. 


MATERIAL  RECEIVED 


By  whom  delivered 


FIG.  98.      FORM  USED  BY  WARNER  SUGAR  REFINING  CO.  FOR 
RECORDING  RECEIPT  OP   MATERIALS 

ing  department.  Another  illustration  is  given  in 
Figure  99.  This  is  more  nearly  in  accordance  with 
the  ideal  method  of  recording  receipt  of  material, 
because  it  carries  the  signature  of  the  person  who 
is  responsible  for  approving  quality.  It  is  used  in 
triplicate,  one  copy  following  the  goods  and  one  re- 
maining with  the  receiving  clerk. 

To  summarize  receiving  conditions:  The  receiving 
clerk  should  be  independent  of  any  department;  he 
should  have  copies  of  all  orders  for  goods  he  will 


398 


PURCHASING  AND  STORING 


Rer'ri 

1Q                               From 

Quantity 

Material 

Purchase 
Order  No. 

Receivin 

g  Clei 

^k 

Quality 

F.O.B. 

Quantity 

Freight 

Price 

Mfg.  No. 

Extensions 

Req.  No. 

Job  No. 

Charge  To 

Class 

Amount 

1 

Approved                                                      Total 

FIG.   99.      FORM  FOR  RECORDING  RECEIPT  OF  MATERIAL 

ultimately  have  to  receive;  lie  .should  make  a  record 
of  these  receipts  on  a  form  in  triplicate,  noting  any 
freight  or  delivery  charges;  he  should  r(ii)ort  the 
arrival  of  goods  promptly  to  the  purchasing  depart- 
ment and  should  pass  all  goods  without  delay  through 
the  inspector's  hands  to  the  storeroom,  or*  direct  to 
the  interested  department. 

Value  of  Inspection.— Inspection  is  too  often  the 
weakest  link  in  the  chain  of  activities  connected  with 


RECEIVING,  INSPECTING,  STORING  399 

buying  and  storing  material.  Poor  finish  or  other 
superficial  defect,  incorrect  size,  irregularity  in 
gauge,  and  so  forth,  should  be  detected  at  the  entry 
of  the  material  into  the  establishment  and  not  post- 
poned until  it  has  passed  into  the  production  depart- 
ment. When  it  reaches  that  department  there  should 
be  some  positive  assurance  that  it  is  equal  in  all 
respect  to  the  standard  ordered.  Delays  at  this  point 
of  the  progress  through  the  manufacturing  process 
might  prove  very  costly. 

Another  reason  for  not  delaying  inspection  is  that 
it  is  obviously  incumbent  on  the  buyer  to  advise  the 
seller  of  any  defects  immediately  on  arrival  of  the 
goods,  or  within  a  reasonable  period.  If  this  were 
not  done  it  would  be  very  difficult,  in  some  cases,  to 
get  the  sellers  to  take  the  goods  back  or  to  get  any 
adjustment.  The  practice  of  receiving  all  kinds  of 
materials  and  supplies  into  a  manufacturing  estab- 
lishment and  simply  counting,  measuring,  weighing 
them,  and  then  passing  them  along  for  consumption 
or  use  is  far  too  common  and  cannot  be  too  greatly 

deplored. 

When  discussing  this  subject,  I  have  been  met  with 
the  objection  that  it  is  not  possible  for  many  manu- 
facturing concerns  to  maintain  a  receiving  depart- 
ment, an  inspection  department,  and  a  storeroom  as 
separate  entities.  This  may  be  true,  but  it  is  no 
reason  for  not  properly  examining  and  inspecting 
all  goods  received  for  use  in  the  plant. 

Inspecting  Methods.— Every  establishment,  what- 
ever its  size,  must  have  some  person  or  persons  to 
receive,  inspect,  and  store  material.    In  very  small 


400 


PURCHASING  AND  STORING 


concerns  the  functions  can  bo  combined  in  one  man 
who  should  be  capable  of  determining  inspection 
questions.  In  large  establishments  the  function  of 
receiving  and  inspection  can  be  combined,  while  in 
still  larger  plants  the  three  activities  can  be  entirely 
separated. 

Inspection  means  the  detection  of  poor  quality, 
such  as  can  be  discovered  by  close  observation  or 
some  simple  tests;  the  detection  of  irregularity  in  the 
size  of  small  articles;  the  measuring  of  gauges  and 
sizes  by  simple  instruments,  such  as  micrometers, 
calipers  and  gauges.  An  examination  should  be  made 
for  flaws  and  poor  finish;  also  whether  goods  have 
deteriorated  from  atmospheric  conditions,  poor  pack- 
ing or  exposure  to  the  weather.  In  fact  the  inspec- 
tion of  raw  material  should  cover  everything  except 
such  tests  as  may  be  necessary  to  carry  out  in  the 
chemical  laboratory  or  physical  testing  room. 

The  two  latter  methods  should  be  applied  to  all 
materials  which  the  technical  staff  has  previously 
decided  are  vital  in  production  work.  Th(»  inspector, 
upon  notification  of  the  material  which  is  to  undergo 
these  tests,  should  send  as  many  samples  to  the  chem- 
ical or  testing  room  as  required,  properly  identifying 
them  with  the  order  and  shipment  to  which  they  be- 
long. 

Naturally  there  must  be  some  means  of  knowing 
that  goods  have  been  inspected  and,  after  the  chem- 
ical or  physical  test,  a  form  similar  to  Figure  100 
should  be  used.  This  should  be  in  triplicat<i  or  quad- 
ruplicate as  may  be  necessary.  In  any  cas(i  the  pur- 
chasing department  and  production  department  should 


RECEIVING,  INSPECTING,  STORING  401 


REPORT    OF    TEST 


Purchase  Order  No.. 


Date. . 


NOTE;-  Refer  to  purchase  order  for  nature  of  test 
The  material  listed  below  is  offered  for  testing  purposes 


Date  Received 


Quantity 


Material 


Car  No. 


RESULT  OF  TEST 


Copies  To 


Signed . 


L 


PIG.  100       REPORT  OF  CHEMICAL  OR  PHYSICAL  TEST  OF  INCOMING 

RAW  MATERIAL 

each  have  a  copy  It  is  not  necessary  that  a  special 
form  for  the  regular  inspection  should  follow  the 
receiving  clerk,  because  the  copy  of  receiving  clerk's 
report  would  follow  the  material  and  as  it  passes  the 
inspector  he  would   sign  the  report  in  the  alloted 


402 


PURCHASING  AND  STORING 


space,  or  use  a  rubber  stamp  reading  *Mnspected'* 
with  his  initials  after  it,  am\  pass  the  report  along 
with  the  goods  to  the  storeroom. 

Receiving  Material  Into  Stores.— The  raw  material 
and  supplies,  after  passing  the  inspector,  are  received 
into  the  stores.  They  should  then  be  promptly  placed 
m  their  proper  receptacles  or  in  the  spaces  allotted 
to  them.  This  is  a  feature  of  stores  handling  which 
needs  close  watching  by  the  chief  storekeeper.  When 
goods  are  to  be  taken  out  of  stores,  delay  should  not 
be  tolerated,  because  usually  a  messenger  or  carrier 
is  waiting.  Incoming  material  is  too  often  allowed 
to  accumulate  on  trucks  or  in  piles  until,  presumably, 
a  more  convenient  time  can  be  found  foi-  disposing 
of  it. 

Emphasis  has  already  been  placed  on  the  import- 
ance of  the  manual  operations  and  the  necessity  of 
their  being  just  as  accurate  as  the  clerical  work.  If 
articles  of  any  sort  are  allowed  to  remain  scattered 
near  the  stores  entrance,  even  for  a  short  period,  it 
is  only  natural  that  if  a  requisition  be  received  for 
some  of  the  same  articles,  it  may  be  filled  in  the  most 
convenient  manner  from  the  scattered  heap  instead 
of  properly  from  the  bin. 

Finished  Material.— In  some  establishments  finished 
parts  go  directly  to  the  assembling  room.  Others 
keep  them  distinct  and  separate  from  the  raw  ma- 
terial stores.  While  still  others  incor])orate  the 
finished  parts  stores  with  the  raw  material  and  sup- 
plies. The  latter  course  is  preferable,  as  a  saving 
can  be  effected  both  in  the  manual  and  in  the  clerical 
help,  as  well  as  in  storage  space  and  equipment.    It 


RECEIVING,  INSPECTING,  STORING 


403 


should  be  recognized,  however,  that  finished  material 
may  travel  a  somewhat  different  course  from  raw 
material  in  its  exit  from  the  storeroom.  This  point 
should  be  among  those  considered  in  deciding  the 
location  of  the  storeroom. 

Finished  material  is  of  two  kinds:  it  is  either  a 
component  part  of  a  machine  and  not  salable  except 
with  the  machine,  or  it  may  be  a  finished  marketable 
article.  The  former  is  usually  designated  a  finished 
part,  while  the  latter  is  known  as  finished  stock  and 
is  sometimes  kept  in  a  finished  stock  room.  This 
item  includes  assembled  machines,  that  is,  the  product 
of  the  factory  ready  for  shipment. 

As  far  as  storage  problems  are  concerned  there  is 
no  radical  difference  in  either  the  manual  or  clerical  ^ 
work  connected  with  the  storage  of  any  of  these 
articles.  They  are  subject  to  the  same  regulations 
as  the  raw  material — their  entry  and  exit  must  be 
properly  recorded  under  the  same  conditions  and  in 
a  similar  manner. 

Storing^  Material. — There  are  some  considerations 
common  to  any  storeroom.  For  instance,  material 
which  is  frequently  called  for  should  be  within  easy 
reach,  and  heavy  material  if  it  is  not  allowed  to 
remain  on  platforms,  as  described  in  Chapter  XVII, 
should  be  stored  at  a  convenient  height  to  be  loaded 
upon  a  truck.  The  alleyways  should  not  be  too 
narrow,  as  the  racks  darken  them,  and  insufficient 
space  will  make  it  awkward  to  get  material  out 
promptly. 

A  common  fault  is  to  find  articles  of  the  same  kind 
in  more  than  one  stock  bin.     The  old  style  of  rigid 


404 


PURCHASING  AND  STORING 


I 


shelving  and  divisions  was  inelastic,  and  when  the 
stock  happened  to  be  increased  beyond  the  capacity 
of  the  bin  allotted  to  it  an  additional  location  had 
to  be  found.  This  might  be  at  some  distance,  but 
even  if  it  was  adjacent  there  was  always  the  danger 
that  its  location  would  be  overlooked.  With  adjust- 
able shelving  and  racks,  storing  is  greatly  simplified. 
The  illustrations  in  Chapter  XVII  show  that  there  is 
no  limit  to  the  width  or  height  of  adjustable  bins. 
Whenever  the  stock  increases  to  a  point  where  the 
space  allotted  will  not  take  care  of  it,  the  extreme 
flexibility  of  the  shelving  permits  of  any  necessary 
increase,  so  that  all  articles  can  be  placed  in  one 
receptacle. 

Again,  if  more  than  one  bin  or  location  is  assigned 
to  an  article,  the  storekeepers  are  more  apt  to  omit 
an  item  in  filling  a  requisition,  as  they  may  find  that 
one  bin  is  empty  and  fail  to  remember  that  there  is 
more  of  the  same  article  in  an  adjoining  bin.  Then 
too,  the  use  of  more  than  one  location  for  the  same 
article  tends  towards  the  accumulation  of  shelf-worn 
or  old  stock.  The  most  convenient  location  will  in- 
variably be  approached  first  and  the  more  remote 
one  neglected.  Such  double  locations  mean  that  the 
helpers  have  more  things  to  remember,  and  naturally 
leads  to  a  larger  percentage  of  errors.  Stress  has 
been  laid  on  this  feature  of  storing,  for  my  experi- 
ence has  proven  it  to  be  prolific  of  exceptionably  bad 
situations  and  conditions. 

Identifying  and  Locating  Material.— All  bins  should 
be  numbered,  and  all  tiers  should  be  either  lettered 
or  numbered,  or  both.   In  fact,  all  receptacles  should 


RECEIVING,  INSPECTING,  STORING 


405 


have  some  identification  mark  which  should  be  en- 
tered on  the  perpetual  inventory  as  invariably  as 
though  it  were  the  address  of  a  customer  in  the  sales 
ledger.  In  the  illustrations  given  in  Chapter  XVII, 
several  schemes  are  shown.  A  very  good  system  is 
the  use  of  metal  flags  distinctly  lettered  or  numbered 
attached  to  the  framework  of  the  receptacle. 

In  all  of  the  illustrations  shown  it  will  be  noticed 
that  card  holders  are  furnished  with  the  bins.  These 
should  unfailingly  be  utilized  for  their  intended  pur- 
pose. I  have  seen  men  storing  small  articles  in  the 
storeroom  approach  a  bin,  extract  one  of  its  contents, 
match  it  up  with  the  new  goods,  and  then,  if  super- 
ficially they  corresponded,  dump  the  new  lot  in  with 
the  old. 

No  matter  what  the  article  it  has  a  name,  size,  or 
some  distinguishing  characteristics,  and  there  should 
be  a  place  for  it  properly  provided  with  a  distin- 
guishing card.  Even  the  partitioned  spaces  in  the 
yards  should  be  numbered  or  identified.  If  this  is 
not  done  it  is  so  easy  to  forget  which  location  con- 
tains a  certain  carload  of  pig  iron,  or  where  some 
lumber  was  stored.  Hence  when  it  becomes  neces- 
sary to  identify  the  shipment  it  cannot  be  done  posi- 
tively. 

Material  Returned  to  Stores. — If  for  any  reason  it 
becomes  necessary  for  the  shop  to  return  material  to 
the  stores,  a  credit  requisition  should  accompany  it, 
designating  the  order  on  which  it  applies  and  any 
other  particulars  required  by  the  cost  accountant. 
These  instances  occur  with  the  curtailing  or  cancel- 
ling of  orders  by  the  production  department. 


406 


PURCHASING  AND  STORING 


Some  departments  may  also  have  a  surplus  quan- 
tity of  supplies  from  time  to  time.  It  is  far  too  com- 
mon a  practice  to  allow  these  to  remain  in  the 
department,  or  to  return  them  to  the  stores  without 
any  memorandum.  The  result  is  that  th(iy  do  not 
get  on  the  records.  Insistence  is  again  placed  on  th(» 
absolute  necessity  of  having  a  receiving  memorandum 
for  everything  going  into  the  stores.  If  this  is  not 
done,  the  clerical  records  surely  will  not  be  posted 
with  the  entries,  and  proper  credits  to  tlie  depart- 
ments or  production  will  not  appear  in  the  cost 
accounts.  Figure  101  illustrates  a  form  which  can 
be  used  for  all  supplies  and  raw  material  returned 
to  stores. 

Scrap. — The  remarks  in  the  two  preceding  para- 
graphs apply  with  equal  force  to  all  scrap.     Such 


To  apply  on  order  no. 


CREDIT  REQUISITION 

Material,  Supplies  or  Scrap  returned  to  Stores 
Date. 


QUANTITY 


DESCRIPTION 


SIZE  OR  PAH.  NO. 


From  Dept  No.. 
Delivered  by  — 


Foreman 


Received  by 


PIG    101.      CREDIT  REQUISITION 

Everything  sent  to  the  stores  from   the  shop  or  any  department 
shoHld  be  accompanied  l)y  a  form  similar  to  this. 


RECEIVING,  INSPECTING,  STORING 


407 


material  should  pass  into  the  possession  of  the  store- 
keeper at  the  earliest  convenient  opportunity.  Some 
scrap  has  a  very  considerable  value,  and  as  much 
attention  should  be  paid  to  its  care  as  is  paid  to  new 
raw  material,  hence  the  perpetual  inventory  should 
show  a  record  of  all  scrap.  It  is  the  practice  of  some 
concerns  to  send  scrap  to  the  shipping  clerk;  but  this 
cannot  be  recommended,  for  it  should  appear  in  the 
inventory  and  it  is  not  always  wise  to  sell  at  once. 

On  the  receipt  of  scrap,  an  advice  should  be  sent 
to  the  purchasing  agent,  for  he  should  have  control 
of  the  sale  as  he  is  best  fitted  to  know  the  most 
favorable  market  and  the  best  time  to  sell.  It  is 
possible  that  the  disposal  of  scrap  might  be  delayed 
several  weeks  or  even  months,  and  in  the  meantime 
the  only  proper  place  for  it  is  the  storeroom. 

Obsolete  material  should  be  treated  in  a  similar 
manner  to  scrap,  and  an  advice  similar  to  the  form 
illustrated  in  Figure  102,  should  be  sent  to  the  pur- 
chasing agent.  The  storekeeper  should  allocate  some 
portion  of  his  storage  space  for  all  scrap  and  obsolete 
material,  keeping  it  entirely  separate  from  the  new  ma- 
terial and  in  a  location  where  it  will  not  encumber  the 
free  movement  of  the  active  storage  items. 

Stationery  Stores. — The  average  business  house  is 
more  wasteful  with  stationery  than  with  any  form 
of  supplies.  The  percentage  of  concerns  which  keep 
no  records  of  such  stock  is  extremely  high.  A  great 
many  establishments  keep  their  stationery  stock  in 
a  cupboard  or  some  similar  kind  of  receptacle,  and 
most  of  the  others  keep  it  in  the  general  office  and 
hand  it  out  on  a  verbal  request. 


408 


PURCHASING  AND  STORING 


HatP 

To  the  Purchasing  Agent 

The  material  listed  below  is  now 

in  the  stores  and  is  to  be  sold  as  early  as  possible 

Quantity 

Material 

Condition 

* 

Received  from  Dept.  No.  _ 

- 

Storekeeper 

PIG.    102.      REPORT    FROM    STOREKEEI'ER    TO    PURCHASING    AGENT 
THAT  SCRAP  OR  OBSOLETE  MATERIAL  HAS  BEEN  RECEIVED 

The  general  storekeeper  should  have  charge  of  all 
stationery,  including  pens,  pencils,  ink,  paper  fas- 
teners, desk  pads,  inkstands,  carbon  paper,  and  so  on. 
Important  savings  can  be  effected  by  competent  con- 
trol of  everything  of  this  nature.    Standardized  office 


RECEIVING,  INSPECTING,  STORING  409 

furniture  should  be  adopted,  and  the  desks  and  chairs 
should  be  given  form  numbers.     Pencils,  paper  fas- 
teners, inkstands,  etc.,  should  all  have  form  numbers. 
These  are  essential  for  identification  and  are  highly 
effective  in  reducing  the  number  of  varieties  in  use. 
A   copy   of   every   printed   form   used   should   be 
posted  on  a  loose-leaf  sheet  and  fastened  in  a  binder. 
The  sheets  should  be  of  such  size  that  the  form  num- 
ber and  name  of  form  may  be  written  at  the  top  and 
the  purpose  of  the  form  and  detailed  instructions  as 
to  its  proper  use  may  be  written  below.    Such  binders 
become   extremely   valuable  in   educating  new   em- 
ployees in  the  system  in  use.     A  duplicate  may  be 
kept  in  the  purchasing  department  and  will  be  found 
very  useful  in  making  purchases.    It  is  easily  kept 
up  to  date,  is  always  at  hand  for  reference,  and  the 
system  of  the  establishment  can  be  studied  at  any 
time. 


CHAPTER  XX 


DISTRIBUTION  OF  MATERIAL  FROM  STORES 


Delivery  Problems.— Probably  the  most  important 
activity  in  connection  with  the  physical  operation  of 
raw  material  stores,  is  the  delivery  or  distribution 
of  them  to  the  various  applicants.  Material  may 
come  in  in  very  large  quantities  and  it  may  go  out 
in  very  small  quantities.  Incoming  material  should 
be  put  into  the  proper  receptacles  promptly,  but  it  is 
not  so  imperative  as  delivering  outgoing  material 
immediately  upon  the  receipt  of  an  application. 

With  the  larger  number  of  operations  there  is  more 
danger  of  mistakes.  Moreover,  the  delivery  records 
must  be  posted  promptly  so  that  close  track  may  be 
kept  of  the  stock.  The  assistants  engaged  in  this 
work  must  be  thoroughly  conversant  with  the  stock 
and  must  be  able  to  make  delivery  without  delay. 
They  must  be  able  to  scrutinize  requisitions  and  de- 
cide whether  they  include  all  tlie  requisite  informa- 
tion. They  must  also  see  that  the  requisitions  are 
signed  by  a  forman  or  other  person  authorized  to 
order  material  from  the  stores. 

The  question  of  authority  to  requisition  material  is 
most  important.  The  men  empowered  to  do  so  should 
be  designated  by  the  general  superintendent  or  some 
person  in  authority.     Irresponsible  persons   should 

410 


DISTRIBUTING  MATERIAL 


411 


never  be  given  authority  to  withdraw  stores.  If  the 
raw  material  is  small  in  bulk  and  high  in  intrinsic 
value,  serious  losses  might  occur.  There  is  or  should 
be,  however,  complete  control  in  the  shop  of  all 
material  drawn  from  the  stores  for  production  pur- 
poses, and  any  excess  or  waste  should  be  quickly 
discovered.  But  prevention  of  overdrafts  on  the 
stores  is  better  than  rectification  after  mistakes  are 

made. 

With  all  kinds  of  supplies  and  small  tools,  persons 
without  a  sense  of  responsibilty  could  obtain  from 
stores  much  larger  quantities  than  necessary,  as  these 
are  more  difficult  to  control,  the  ultimate  use  being, 
in  many  cases,  general  and  not  charged  directly  to 
a  production  order.  It  is  undoubtedly  in  connection 
with  these  that  strict  supervision  is  necessary. 

Form  of  Requisitions.— The  requisitions  or  orders 
on  the  stores  for  withdrawing  material  vary  greatly. 
These  variations  are  caused  by  differing  production 
methods  or  cost  accounting  systems.  As  far  as  the 
operation  of  the  stores  is  concerned  the  variations 
are  not  of  great  importance,  except  that  in  certain 
particulars  they  must  conform  to  stores  requirements. 
The  essential  features  are  a  clear  and  unmistakable 
description  of  the  material,  for  what  purpose  it  is 
required,  an  authorized  signature,  correct  dating, 
and,  possibly,  sequential  numbering. 

These  documents  do  not  remain  permanently  in  the 
storekeeper's  possession,  but  after  the  proper  entries 
are  made  in  the  stores  records  they  pass  along  to  the 
cost  accountant  who  is  more  vitally  interested  in 
their   final   disposition    and   preservation    and   who 


W  L 


412 


PURCHASING  AND  STORING 


utilizes  them  in  connection  with  other  documents  and 
information  in  compiling  records  of  costs.  It  is  pos- 
sible, therefore,  that  the  cost  department  would 
desire  the  requisitions  on  the  stores  to  be  uniform 
with,  or  bear  some  relation  to,  the  other  forms  they 
may  be  using. 

Although  the  actual  form  used  may  not  be  of  great 
importance  as  long  as  it  embodys  certain  features, 
still  the  provision  and  delivery  of  material  is  im- 
portant and  calls  for  some  elaboration  in  detail,  for 
the  whole  of  the  preceding  discussion  has  been  lead- 
ing up  to  this  function  and  the  fruits  of  good  pur- 
chasing and  storekeeping  should  be  apparent  at  this 
point. 

Figure  103  illustrates  a  form  used  by  the  Otis 
Elevator  Company  in  withdrawing  material  from 
stores.  These  forms  are  in  duplicate,  one  copy  being 
retained  by  the  stores  department  and  one  by  the 
department  receiving  the  material.  Another  form 
used  for  a  stock  order  or  jobbing  order  is  illustrated 
in  Figure  104.  The  latter  is  really  a  copy  of  the 
shop  order  and  contains  a  list  of  the  material  re- 
quired in  the  space  designated. 

Shortages. — Assuming  that  the  material  is  in  the 
stores  and  delivery  can  be  made  at  once,  the  oper- 
ation is  simple  and  the  transaction  can  be  quickly 
closed  and  disposed.  But  there  are  times,  and  they 
are  increasing  in  frequency  with  recent  conditions, 
when  only  part  of  the  material  called  for  can  be  de- 
livered. There  then  exists  a  shortage,  and  a  **  short- 
age" form  like  that  shown  by  Figure  105  is  issued 
by  the  storekeeper. 


DISTRIBUTING  MATERIAL 


413 


Certain  employees,  known  as  -shortage  chasers, 
are  continually  following  up  the  progress  made  on 
orders  in  the  various  departments,  and  if  any  depart- 
ment  fails  to  get  its  portion  of  the  work  done  on  the 
appointed  date  through  lack  of  raw  material  it  must 


MATERIAL  REQUISITION 


Order  No 

To  Dept.  No. 


Req.  No. 


Date. 


Deliver  with  this  order  to  dept.  no. 


To  be  used  for 


Qty. 


Patt.-Sym. 

Number 

or  Size 


Description 


1: 


Foreman 


riG.   103,      MATERIAL  REQUISITION 


I 


414 


PURCHASING  AND  STORING 


have  a  shortage  form  issued  by  the  storekeeper  show- 
ing this  lack.  When  the  chaser  discovers  tliis  con- 
dition he  will  immediately  apply  to,  or  literally  he 
will  ** chase,"  the  storekeeper  until  the  material  is 


Order  No. 
Entered— 


Wanted 


STOCK     ORDER 

Material  in  Stock 
or  Ordered  On  _ 


For. 


Due 


ORDER 


MATERIAL  REQUIRED 


Stock  Ready  for  Delivery  in  Department  No By_ 


Date. 


Dept. 


Del.  to 
Dept 


Operations 


Time 


To 

Finish 


Tools 


Jigs.  Etc. 


Jigs.  Etc. 
Stored  in 


Date 
Rec'd 


Number  of  Pieces 


Rec'd 


Spoil- 
ed 


Defect 


NOTE:    If  Dates  as  Listed  Cannot  be  Met.  Return  Order  to  Planning  Depart,nent 


PIG.    104.      STOCK   ORDER 


DISTRIBUTING  MATERIAL 


415 


SHORTAGE 


Date. 


Customer 

Order  Calls  for. 


Order  No 

Date  Wanted. 


Amt. 


Name  of  Part 


Sym.  No. 


Shop  No. 


Fdy   No 


Pur.  No. 


Issued  by. 


Department . 


PIG.   105.      SHORTAGE  FORM 


obtained  and  the  shortage  made  good.  Obviously 
the  storekeeper  has  recourse  to  the  purchasing  agent 
to  supply  his  peeds.  There  may  not  be  any  blame 
attached  to  any  individual  for  the  insufficient  sup- 
ply of  material,  but  undoubtedly  the  condition  occurs 
too  often  and  its  entire  elimination  is  highly  desir- 
able. This  feature  has  already  been  fully  covered 
under  the  discussion  of  maximum  and  minimum 
limits. 

Deferred  DeUveries.— All  the  material  specified  on 
a  stock  order  may  not  be  called  for  at  one  time,  or 
the  date  specified  for  obtaining  the  material  from' the 
stores  may  be  much  later  than  the  actual  date  of  the 
order.     This  creates  a  condition  known  as  an  **ap- 


416 


PURCHASING  AND  kSTORING 


parent"  shortage.  This  differs  from  a  real  shortage 
because,  although  the  material  is  requisitioned,  it  is 
still  in  the  stores.  Sometimes  these  ** apparent'' 
shortages  are  somewhat  difficult  to  handle  in  such  a 
way  as  not  to  accumulate  too  much  stock  and  yet 
have  sufficient  for  current  needs. 

Several  ways  may  be  employed  to  take  care  of  this 
condition,  and  the  one  used  will  depend  largely  on 
how  often  the  condition  occurs  and  the  quantity  of 
material  involved.  A  scheme  which  has  been  car- 
ried out  successfully  is  to  take  the  material  covered 
by  the  orders  and  place  it  in  tote  boxes.  These  boxes 
are  then  kept  in  a  section  of  tlie  storeroom  devoted 
to  this  purpose  and  their  contents  are  treated  as  if 
already  delivered  from  the  stores,  although  actually 
still  in  the  storekeeper's  possession.  Should  the 
amount  of  material  set  aside  in  the  tote  boxes  reach 
undue  proportions,  and  should  the  storekeeper  con- 
sider that  he  is  justified  in  using  part  of  it  for  cur- 
rent requirements,  the  amount  needed  is  extracted 
and  a  ** shortage"  ticket  is  put  in  the  box.  The  store- 
keeper must,  of  course,  know  that  he  can  procure  the 
material  at  short  notice  to  make  up  the  deficit. 

If  there  are  a  large  number  of  orders  calling  for 
deferred  delivery,  or  if  it  is  heavy  material  which 
cannot  be  segregated  in  tote  boxes,  it  is  better  to 
have  a  supplementary  sheet  attached  to  the  perpetual 
inventory,  entering  on  this  sheet  all  items  called  for 
by  the  shop  order  but  not  taken  from  the  stores.  For 
example,  suppose  the  inventory  shows  5000  units  in 
the  stores,  but  the  supplementary  memorandum  at- 
tached to  the  inventory  sheet  or  card  may  show  that 


DISTRIBUTING  MATERIAL 


417 


4000  are,  or  will  shortly  be,  needed  for  shop  orders. 
Actually,  then,  there  is  only  a  balance  of  1000  avail- 
able for  requisitions  which  may  come  in  at  any  mo- 
ment. As  fast  as  the  material  is  taken  from  the  stores 
the  items  on  the  supplementary  sheet  must  be  can- 
celled and  transferred  to  the  permanent  inventory. 
This  scheme  is  recommended,  for  the  storekeeper  has 
a  complete  record  of  the  quantities  actually  in  the 
stores  and  the  quantities  which  will  be  needed  for  all 
production  orders  as  soon  as  they  are  issued.  In  ad- 
dition, he  will  know  the  dates  the  latter  material  will 
be  called  for,  and  can  determine  whether  he  can 
safely  use  part  of  this  and  create  an  ** apparent" 
shortage. 

Issuing  Stores  in  Sets  or  Groups. — There  are  some 
artides  which  can  be  issued  from  the  stores  without 
the  necessity  of  specifying  each  item.  For  instance, 
in  a  boiler-making  establishment  there  may  be  a 
dozen  or  even  twenty  articles  kept  in  the  stores 
which  are  all  standard  fittings  for  a  standard  boiler. 
A  great  deal  of  time  and  work  can  be  saved  by  fur- 
nishing the  storekeeper  with  a  complete  list  of  the 
standard  set.  Then  when  they  are  needed,  all  that 
is  necessary  is  to  make  the  requisition  for  one  or 
more  sets  of  the  fittings.  This  saves  writing  out  a 
list  of  the  twenty  items.  But  before  the  requisition  is 
sent  to  the  storeroom  it  is  advisable  to  send  word 
that  such  a  requisition  will  shortly  be  presented,  so 
that  the  storekeeper  may  gather  all  the  items  to- 
gether and  not  keep  the  runner  or  messenger  waiting 
who  goes  for  the  material  while  it  is  being  brought 
together  for  issuance. 


418 


PURCHASING  AND  STORING 


Shop  Orders  and  Stores  Requisitions.— To  show  the 
close  relation  between  shop  orders  and  stores  requi- 
sitions the  illustration  shown  in  Figure  106,  used  by 
the  Jeffrey  Manufacturing  Co.,  is  a  good  example. 
This  form  is  in  three  sections.  The  section  of  inter- 
est to  the  storekeeper  is  the  bottom  one,  as  it  is  this 
that  forms  the  stores  requisition  and  upon  which  the 
material  is  specified. 

It  is  impossible  to  give  illustrations  or  describe 
methods  which  would  fit  every  condition.  Industrial 
establishments  are  too  varied  in  their  nature  and 
characteristics.  They  all  use  some  articles  wliich,  to 
them,  are  raw  material,  although  they  may  have  been 
the  finished  product  of  some  prior  manufacturing 
process.  As  far  as  the  operation  of  the  storeroom  is 
concerned,  this  would  not  make  much  difference  if  the 
articles  or  materials  entering  into  a  product  were  all 
drawn  from  the  stores  at  one  time.  But  this  is  not 
possible  in  those  cases  in  which  a  factory  is  turning 
out  a  product  composed  partly  of  material  wliich  is 
to  undergo  prolonged  manipulation  in  the  shop  and 
partly  of  articles  on  which  no  work  is  to  be  done.  The 
illustration  previously  given  of  boilers  is  an  example 
of  this. 

Another  instance  is  in  manufacturing  pianos,  the 
lumber  for  which  might  be  drawn  from  stock  sev- 
eral weeks  or  months  in  advance  of  the  hardware 
and  fittings,  such  as  locks,  hinges,  castors,  and  so  on. 
These  articles  are  really  the  finished  product  of  some 
other  manufacturer,  and  no  additional  labor  is  ex- 
pended on  them,  but  they  are  nevertheless  raw  ma- 
terial to  the  piano  manufacturer.    In  so  far  as  store- 


DISTRIBUTING  MATERIAL 


419 


Board  No o    ^    ».t 

Card  No Total  Cards S.  O.  No 

Date DEPT.  NO Cat.  No. 


The  UNIT  order  calls  for  the  following: 


Dwg.  No.. 


Mk. 


Material 

Wanted  by 

Scheduled  by- 
Deliver  to 


.Labor. 


Pattern  No 

.Checked  in  Dept.. 


Rec'd  by. 

(Limit  on  back)_ 


Oerk 


Card  No.. 
Date 


Board  No.. 


-Total  Cards 


S.  O.  No. 


DEPT.  NO. 


Cat.  No.. 


Dwg.  No.. 


Mk. 


This  card  INDENTIFIES  material  or  parts  attached  as  the  following: 


.Labor. 


Material 

Stock  Condition 

Stock  to  be  delivered . 
File  date 


Pattern  No. 


.in  office         Checked  in  Dept.. 
(Moves  on  back) 


Board  No. . 

Order  Card  No l_ Total  Cards. 

Material  Card  No. 


S.  O.  No.. 


Total  No.' 


Date- 
Store. 


Dwg.  No.. 


CaC.  No.. 


Mk 


-To  DEPT.  NO.. 


Delivery  Date. 


Amt. 


Description 


Weight 


Price 


FiUed  by. 


Value 


Clerk 


FIG.    106.      SHOP    ORDER    AND    STORES    REQUISITION    USED   BY 
JEFFREY   MANUFACTURING   CO. 


420 


PURC^HASINa  AND  STORING 


keeping  is  concerned  the  problem  lies  in  deferring  the 
storing  of  them  until  the  factory  requires  them. 

In  this  example,  the  manufacturing  department 
after  consultation  with  the  sales  department,  might 
decide  to  put  an  order  in  the  shop  to  make  up  one 
hundred  pianos,  and  would  put  in  hand  the  necessary 
castings  and  draw  from  the  stores  the  lumber  and  all 
material  on  which  labor  was  to  be  expended.  But  it 
would  not  be  necessary  at  the  same  time  to  requi- 
sition for  immediate  delivery  from  the  storeroom  the 
articles  which  would  be  used  only  in  assembling  the 
finished  product. 

In  all  cases  of  this  character  there  must  be  a  close 
approximation  given  to  the  storekeeper  of  the  date 
on  which  such  finished  articles  will  be  required.  If 
this  is  not  done  a  very  large  stock  would  otherwise 
be  on  hand  many  months  in  advance  of  actual  re- 
quirements, which  would  be  detrimental  to  good 
storekeeping.  The  manufacturing  department  is  the 
sole  arbiter  in  these  matters.  It  has  to  decide 
whether  all  the  product  is  to  be  assembled  on  com- 
pletion of  the  work  in  the  shop,  or  only  a  portion  of 
the  quantity  being  made  up.  Due  advice  of  this  must 
be  given  the  storekeeper  to  enable  him  to  arrange  his 
stores  to  meet  these  conditions.  Practically  all  mat- 
ters  of  this  character  are  taken  care  of  by  the  plan- 
ning departmnet,  and  the  accurate  operation  of  the 
requirements  and  orders  of  that  department  are  re- 
sponsible for  this  phase  of  storekeeping. 

Supplies  from  Stores.— All  materials  and  articles 
drawn  from  the  stores  which  are  in  the  nature  of  ex- 
pense items  should  be  requisitioned  on  a  form  differ- 


DISTRIBUTING  MATERIAL 


421 


ing  from  the  material  used  in  production  work.  This 
covers  all  material  needed  for  repairs  to  buildings  or 
equipment,  machine  repairs  and  replacements  and  all 
general  shop  supplies. 

There  should  not  be  any  divided  authority  in  con- 
nection with  the  control  of  supplies  and  expense 
items.  They  should  all  be  under  the  jurisdiction  of 
the  general  storekeeper  and  the  use  of  them  defined 
on  the  stores  requisition.  For  instance,  requisitions 
for  supplies  for  ** general  use"  should  be  avoided. 
The  department  in  which  they  are  to  be  used  should 
be  specified  and,  whenever  possible,  the  purpose  for 
which  they  are  required.  The  closer  these  lines  can 
be  drawn  the  greater  will  be  the  saving  in  this  class 
of  overhead  expense. 

Not  only  should  the  control  of  supplies  and  ex- 
pense items  be  vested  in  the  storekeeper,  but  he 
should  have  authority  to  determine  the  maximum  and 
minimum  limits.  This  is  a  different  proposition  to 
that  of  materials  for  production  work  and  quite  a 
different  point  of  view  is  necessary  in  forming  a 
judgment.  The  storekeeper  is  the  man  best  fitted  for 
the  work,  and  he  can  render  important  service  in  its 
execution. 

Stores  Records. — The  compiling  of  stores  records 
has  been  referred  to  in  Chapter  XVIII  in  the  discus- 
sion of  inventories.  Practically  nothing  should  be 
permitted  to  disorganize  the  keeping  of  the  records. 
There  must  be  an  advice  or  document  of  some  kind 
accompanying  all  entries  to  the  stores,  and  requisi- 
tions must  be  obtained  for  everything  leaving  the 
storekeeper's    charge.     If   these   are   properly   safe- 


422 


PURCHASING  AND  STORING 


guarded   and   duly   entered   on   the   inventory,   there 
cannot  be  much  wrong  with  the  records. 

One  of  the  greatest  difficulties  is  the  institution  of 
an  infallible  system  by  which  material  will  be  ordered 
when  the  minimum  is  reached.  The  inventory  may 
be  absolutely  correct  in  every  particular,  but  the 
passing  of  the  minimum  might  not  be  indicated. 

I  have  previously  explained  that  the  minimum  is 
established  on  the  basis  of  the  least  quantity  that  it 
is  safe  to  carry  in  stores  to  meet  the  rate  of  consump- 
tion, plus  the  quantity  which  it  is  estimated  will  be 
consumed  during  the  period  required  to  get  delivery 
— that  is,  from  the  time  the  storekeeper  makes  a 
requisition  on  the  purchasing  agent  until  the  material 
arrives  in  the  stores. 

It  would  seem  that  in  posting  the  entries  in  the 
perpetual  inventory  one  could  not  fail  to  observe  the 
approach  towards  the  minimum.  But  the  clerks  en- 
gaged on  this  work  do  not  always  keep  the  records 
right  up  to  date,  or  they  do  not  balance  them  often 
enough,  or  their  attention  is  distracted  by  other 
duties.  This  has  given  rise  to  tlie  evolution  of  some 
** automatic"  form  to  call  attention  to  the  reaching 
of  the  minimum. 

One  method  is  to  have  tickets  on  4;he  bins  them- 
selves, which  are  distinctly  marked  with  tlui  mini- 
mum quantity.  It  is  the  stockman's  duty  to  note 
when  the  quantity  in  the  bin  is  at  the  low  point  and 
at  once  advise  the  storekeeper.  The  advice  can  be 
accomplished  by  having  two  tickets,  red  and  white, 
in  the  holder  on  the  bin.  The  outside  white  ticket  is 
taken  from  the  holder  and  is  forwarded  to  the  store- 


DISTRIBUTING  MATERIAL 


423 


keeper.  The  red  ticket  is  immediately  exposed  and 
indicates  a  condition  of  danger. 

This  scheme  might  be  used  in  certain  cases  as  an 
aid  to  the  man  who  is  keeping  the  inventory,  but  it 
is  only  permissible  in  those  cases  where  the  stock  can 
be  easily  counted.  For  instance,  if  the  minimum 
were  fixed  at  750  articles  or  units,  it  is  not  conceiv- 
able that  the  stockman  can  count  or  weigh  these 
every  time  he  thinks  the  low  point  is  being  reached 
to  determine  whether  he  must  advise  the  storekeeper. 

Several  other  forms  of  bin  tickets  have  been  de- 
vised, the  object  of  all  being  to  reduce  the  work  on 
the  inventory,  or  for  use  as  an  aid  and  assistance  to 
the  clerks  engaged  on  the  work.  For  example,  in 
those  instances  where  very  frequent  withdrawals  are 
made  from  the  stores,  the  bins  may  be  provided  with 
tickets  on  which  the  stockman  makes  an  entry  each 
time  he  takes  articles  from  the  bins.  When  these 
tickets  are  filled  with  entries  of  deliveries  they  are 
sent  to  the  storekeeper  who  posts  the  total  amount 
on  the  card  as  one  item  in  his  perpetual  inventory. 
Such  instances, ,  where  bin  tickets  may  be  used,  how- 
ever, are  isolated,  and  they  are  more  or  less  make- 
shifts with  the  object  of  relieving  the  work  on  the 
inventory.  Now,  this  work  is  of  prime  importance  to 
good  storekeeping  and  it  cannot  be  minimized  or 
slurred.     The  effectiveness  of  the  inventory  is  surely 

\  going  to  suffer  if  attempts  are  made  to  substitute 
some  other  form  of  recording  receipts  and  deliveries, 
or  if  it  is  regarded  as  a  burden  to  keep  up  and  the 
attempt  is  made  to  reduce  the  burden. 
Every   consideration   of   good   storekeeping,   good 


424 


PURCHASING  AND  STORING 


DISTRIBUTING  MATERIAL 


425 


buying,  and  good  cost  keeping  demands  a  stores  in- 
ventory as  nearly  accurate  as  it  is  humanly  possible 
to  make  it.  There  must  be  sufficient  clerical  help  to 
make  the  postings  on  the  inventory  regularly  and  as 
quickly  as  possible  after  the  delivery  requisitions 
reach  the  inventory  desk.  With  sufficient  clerical  as- 
sistance there  should  never  be  any  question  of  neg- 
lecting to  send  requisitions  to  the  purchasing  agent 
when  the  minimum  is  reached. 

A    very    large    establishment    employing    twelve 
clerks  posting  entries  on  the  stores  inventoi'y  cease 
this  work  every  day  at  four  o'clock.    The  next  hour 
is  devoted  to  writing  requisitions  for  all  material  on 
which  the  minimum  has  been  reached  or  which  is 
special.     This   method   of   procedure    could    not   be 
maintained  if  requisitions  were  not  posted  promptly 
every   day,   every  hour,   and   almost   every   minute. 
This  is  the  only  way  correct  inventories  can  be  kept. 
If  the  requisitions  were  allowed  to  accumulate,  chaos 
would  reign;  and  at  a  late  hour  or  even  the  next  day 
a  hurried  attempt  to  catch  up  with  the  work  would 
mean  that  the  observance  of  the  minimum  would  be 
neglected  and  requisitions  on  the  purchasing  agent 
for  new  material  would  be  delayed. 

Stores  Requisitions  on  the  Purchasing  Agent.— -At- 
tention is  drawn  to  Figure  35  on  page  230.  This 
is  the  storekeeper's  requisition  on  the  purchasing 
agent  to  buy,  and  complete  information  is  given  at 
the  foot  of  the  monthly  consumption.  The  figures  for 
each  month  are  taken  from  the  back  of  the  perpetual 
inventory.  Figure  94,  where  the  records  are  kept. 
These  requisitions  are  written  up  by  the  clerks  who 


post  the  entries  in  the  inventory.  They  fill  in  all  the 
particulars  noted  in  the  various  spaces,  sign  the 
requisitions  and  pass  them  along  to  the  head  store- 
keeper. After  his  signature  is  affixed,  they  pass  to 
the  purchasing  agent,  being  in  his  hands  at  the  open- 
ing of  the  office  the  following  morning.  Many  store- 
keepers make  a  practice  of  drawing  requisitions  once 
a  month  for  a  large  part  of  their  requirements.  This 
may  be  done  with  some  supplies,  but  should  not  be 
followed  in  the  case  of  articles  and  materials  for  use 
in  production  work;  if  it  is,  some  of  the  finer  points 
connected  with  the  economics  of  storing  must  be 
sacrificed. 


INDEX. 


Acceptance  Notice,  138 

— of  Goods,   304 
Acceptances,  Trade,  137 
Accumulating  and  Recording  Informa- 
tion,  227 
Acknowledgment  of  Orders,  257 

—Slip,  110 

— Slip,  Order  with,  258 
Administration   and   Management,    163 
Agencies  and  Registers,  201 
Agent,  Purchasing   (see  Puj-chasing) 
Agents,  Orders  to,  301 
Agreements,  Care  in  Making,  90 

— Reciprocal,     183 
Allowance,  Freight,  311 
Arrangement  of  Prices,  88 

— of  Prices,    Strategy  in,  79 

— of  Purchasing  Department,   196 
Articles,  Intended  Use  of,   38 
Assistant  Purchasing  Agent,  Functions 

of,  193 
Authority   of   Purchasing    Agent,    168, 
299 
— Price,   75 


Balance  Scale,  Even,  344 

Bed  Frames,  Moving  of,  353 

Beds,  Brass,  Counting  Parts  for,  341 

Belt  Conveyor,  Overhead,  361 

Bins,  Closed,  365 

— Metal,    362 

— Sectional,    and   Shelving,   362 
Books  on  Purchasing,  199 
Brass  Beds,  Counting  Parts  for,  341 
Business  Friendship,  184 
Buyer   and   Seller,    Relations   between, 
43 

— and  Selling  Expense,  45 

— Relation  to  Finance,   162 
Buyer's  Obligation,    149 
Buying,  Influence  of  Charts  on,  223 

— Methods,   81 

— Methods,  Examples  of,  82 
Schedule,   120 


Cancellation  of  Contract,  303 
Caibon  Copies,  305 
Card,  Catalogue  Index,  211 
— Index  for  Specifications,   17 
— for  Recording  Sources  of  Supply, 

229 
— Form  of  Perpetual  Inventory,  391 
Cash  Discounts,  99,   145,  311 
— Discounts,    Securing  of,  291 
— Net,  Definition  of,  145 
Catalogue,  Index  Card.   211 

— System,  Universal  Standard,  210 
Catalogues,  202 
— Filing  of,  209 
■ — Procuring  of,  208 
— Standardization  of,  206 
Changes  in  Contracts,  93 
Charges,  Crating  and  Packing,  306 

— Freight,  Checking  of,  289 
Chart   Showing   Rise    in    Steel   Prices, 

217 
Charts  and  Figures,  214 
— Influence  of,   223 
— Value  of,  216 
Checking  Freight  Charges,   289 
— of  Invoices,  283 
— Prices,   288 
Chemical  Test,  Report  of,  401 
Chief  Clerk,   193 

Claims    against    Transportation     Com- 
panies, 309 
Clause  on  Penalty.  304 
Clerical  Work  in  Storerooms,  337 
Clerk,  Follow-up,  195 
— Information,  196 
— Invoice,    195 
— Order,    194 
— Price,    194 
— Requisition.  194 
— Traffic,    195 
Closed  Types  of  Bins,  365 
Coal  Specifications,   18 
Combined  Rollway.   Scales  and  Chute, 

361 
Commercial  Definitions,  Standard,  22 

427 


V 


428 


INDEX 


INDEX 


429 


Commodities,   Scarcity  of,  332 
Competition,  Genuine,  49 
Competitive  Prices,  77 
Compiling  of  Records,   177 
Completion  of  Purchasing  Cycle,   134 
Compound  Information,  220 
Conditions  of  Order,  26o 
Confirmatory     Telephone     Requisition, 

242 
Construction  of  Open  Shelving,  367 

— of  Steel  Sectional  Rack,   370 
Co-operation   between   Purchasing   and 

Production  Departments,   118 
Consumption  Record,  Past,  383 
Containers,  Return  of,  301 
Contract,   Cancellation  of,  303 

— Forms,    104 

— Forms,   Remedial,    113 

— Time,  Delivery  Prior  to,   307 
Contracts,  90,  251 

— and  Orders,   103 

— Changes  in,  93 

— Mistakes  in,  305 

— not  Specifying  Quantity,  303 

— Written,  91 
Control,    Delivery    and    Condition    be- 
yond,   307 
Conveyor,  Overhead  Belt,  361 
Conveyors,  358 

— Roller,   359 
Copies,  Carbon,  305 
Correct  Definitions.   326 
Correlation    of    Purchasing    Divisions, 

11 
Cost  of  Issuing  Orders,   180 

— of  Storage,  315 

— Selling,    Reduction   of,   47 
Costs,  Production  and  Delivery,  119 
Cotton,  Prices  of.  217 

— Waste,  Chart  of,  221 
Counting  and  Weighing  Machines,  349 

— Machine  in   Storeroom,   339 

— Machines,   347 

— Methods.    342 

— of  Sheets,  345 

— of  Small  Parts,  345 

— Parts  for  Brass  Beds,  341 

— Parts  in  Storeroom,  339 

— Porcelain  Knobs,    341 

— Problem  of,   338 
Covering    Orders    for    Recording    Pur- 
poses.  113 
Crating  Charges.  306 
Creating  Markets.  53 
Credit  for  Returned  Goods,  309 

— Period,    312 

— Requisition,   406 
Credits,  143 

— Securing  of,  292 


Cycle,  Purchasine.   Completion  of,  134 
Cycles  of  Trade  and  Prices,  73 

Daily  Quotations,  70 

Damages  to  Articles  on  Trial,   302 

Date  of  Delivery,   Importance  of,   119 

— of  Invoices.  313 
Dates  of   Invoice  Payments,    140 
Dating,  No  Extra,   311 
Debit  Invoice,  295 

— Note    Memorandum,    294 
Defective  Material.  Freight  on,  309 
Deferred   Deliveries,  415 
Definition  of  Net  Cash,  145 

— of  Purchasing,   1 

— of  Quality,  or  Grade,  95 

— Sheet,   29,   3o 
Definitions,    Correct,   326 

— on  Stock-keeper's  Record,  36 

— Purpose  of,  28 

— Standard,    19 

— Standard  Commercial,   22 
Delivery  and   Conditions   beyond   Con- 
trol, ^07 

— and  Production  Costs,   119 

— at  Destination,   307 

— Date,   Importance  of  Definite,   119 

— Delivery,   Deferred,   415 

— Helps  in  Gettinsr.    127 

— Place  of,  96 

— Point,    Non-Specification    of,    307 

— Prior   to   Contract  Time,   307 

— Problems.    267.    410 

— Time  of.  96 
Demand  and  Price.  71 
Department.  Purchasing,  4 

— Arrangement  of,    196 

— Organization  Chart  of,  192 

— Organization   of.    190 

— Origin  and  Mission  of,  173 

— Outline  of  Work  for,  189 

— Relation  to  Business,   175 

— Relation  to    Sellers,   178 
Departmental  Losses.  51 

— Meetings.    176 
Departments,  Financial  and  Stores,  334 
Descriptions,  Improper,  24 
Destination,   Delivery  at,   307 
Diagram  of  Divisions  of  Purchasing,  9 
Dies  and   Patterns,   298 

Dimensions,    Standard,    Tabulation   of, 

32 
Discounts,  Cash.  99,  154,  311 
— Securing   of,    293 

Disposition    of    Incoming    Documents. 
226 

Distinction  between  Offer  and   Bid,  92 
Divisions,  Purchasing,  9,  lo,  H 
— Correlating,  11 


Documents,    Disposition    of    Incoming, 
226 

Economics  of  Purchasing,  2 
Elevating  Truck,  Scale,  355 
Emergency  Orders,  126 
Employees,   Experience  Necessary  for, 

181 
Equipment     and     Manual     Operations, 

336 
— Specifications.  17 
Estimating,  Weighing  and,  343 
Ethical    Standards.   Purchasing,    182 
Even  Balance  Scale.  344 
Examples  of  Buying  Methods,  82 
Executive  Pressure.   184 
Experience  for  Employees,  Importance 

of.  181 
Exports  and  Prices,  74 
Extra  Dating,  No,  311 
Extremes  of  Storage  Problem,  323 

Factors,  Storage,  324 

— which  Reduce  Values,  317 
False  Statements,  305 
Field  of  the  Purchasing  Agent,  171 
Figure  1,  Diagram  of  Divisions  of  Pur-    ^ 
chasing,  9 
— 2,   Index  Card  for   Specifications, 

17 
— 3,  Standard  Descriptions  and  Defi- 
nitions,  19 
—A,  Standard  Descriptions  and  Defi- 
nitions,  19 
— 5,  Standard  Descriptions  and  Defi- 
nitions,  19 
— 6,  Standard  Descriptions  and  Defi- 
nitions,  19 
— 7,  Standard  Method  of  Indicating 

Part  Number,  27 
— 8,  Definition  Sheet,  29,  30 
— 9,  Definition  Sheet,  31 
— 10,    Tabulation    of    Standard    Di- 
mensions, 32 
— 11,  Purchase  Order  Record,  35 
— 12,    Definitions    on    Stock-keepers 

Record,   36 
— 13,  Record  of  Sources  of  Supply, 

59 
— 14,  Form    for    Recording    Prices, 

69 
— 15  Form  of  Contract,  106 
— 16,  Order  Form,  109 
— 17,    Order    Form,    with    Acknowl- 
edgment Slip,  110 
— 18,  Record  of  Time  Required  for 

Shipment,    121 
— 19,  Form     for     Reporting     Prog- 
ress of  Orders,  125 


— 20,  Inspector's  Report  Form,  126 
— 21,  Acceptance  Notice,   138 
— 22,   Price   Record,    148 
— 23,    Standard  Price  List,    150 
— 24,   Standard  Price  List,   151 
— 25,   Standard  Price  List,   152 
— 26,  Standard  Price  List,  153 
— 27,  Record  of  Salesmen,    179 
— 28,    Organization    Chart    of    Pur- 
chasing Department,  192 
— 29,  Cataloigue  Index  Card,  211 
— 30,  Catalogue  Index  Card,  211 
— 31,   Chart   Showing  Rise   in    Steel 

Prices,   217 
— 32,  Spot  and  Option  Prices  of  Cot- 
ton, 217 
— 33,  Three  Curve  Chart,  221 
— 34,    Cards   for   Recording   Sources 

of  Supply,  229 
— 35,  Requisition  Form,  230 
— 36,    Material    Consumed    Record, 

231 
— 37,  Price  Record.  232 
— 38,  Requisition   for   Material,  240 
— 40,  Requisition  Form,  241 
—41,  Confirmatory  Telephone  Requi- 
sition, 242 
— 42,  Request   for  Quotation,  245 
— 43,  Request  for  Quotation,  246 
— 44,    Form    for    Tabulating    Quota- 
tions, 247 
— 45,  Contract  for  Purchases 
— 46,  Record  of  Shipments,  255 
—47,  Order  Form  with  Acknowledg- 
ment,   258 
—48,   Order  Form  with   Conditions, 

260 
— 49,   Order  Form,  261 
— 50,  Instruction  Sheet,  263 
— 51,   Request   for  Price   on   Order, 

265 
— 52,  Purchase  Order  Record,  266 
— 53,  Reverse  of  Order  Sheet,  271 
— ^54,  Form  Used  for  Following  Up 

Orders,  274 
— 55,  Form  Letter  for  Following  up 

Shipments,   275 
— 56,  Progress  Report,  276 
— 57,  Form  for  Recording  Invoices, 

282 
— 58,  Cash  Discount  Notice, 
— 59,  Record  of  Receipt  of  Material, 

286 
— 60,  Record  of  Receipt  of  Material, 

287 
— 62,  Form  for  Approving  Invoices, 

259 
— 63,  Debit  Note  Memorandum,  294 


430 


INDEX 


INDEX 


431 


— 64,  Debit-Invoice,  295 

— 65,   Counting  Parts  in  Storeroom, 

339 
— 66,    Machine    Counting    in    Store- 
room, 339 
— 67,     Counting     Porcelain     Knobs. 

341 
— 68,     Counting     Parts     for     Brass 

Beds.   341 
— 69,  Counting  of  Small  Parts,  345 
— 70,  Counting  of  Sheets,  345 
— 71,    Counting   and    Weighing    Ma- 
chines,  349 
— 72,    Counting   and   Weighing   Ma- 
chines,  349 
— 73,    Counting   and    Weighing   Ma- 
chines,  349 
— 74,  Moving  Bed  Frames,  353 
— 75,     Stacking     Finished     Lumber, 

355 
— 76,  Scale  Elevating  Truck,  355 
— 77,  Roller  Conveyors,  359 
— 78,  Roller  Conveyors,  359 
— 79,  Combined  Rollway.  Scales  and 

Chute,  361 
— 80,  Overhead  Belt  Conveyor,  361 
— 81,  Metal   Bins,  363 
— 82,  Metal  Bins,  363 
— 83,  Closed  Types  of  Bins,  365 
— 84,    Construction    of   Open    Shelv- 
ing,  367 

— 85,    Construction    of    Open    Shelv- 
ing, 367 
— 86,  Steel  Sectional  Rack  Construc- 
tion, 370 
— 87,  Stock  Racks,  370 
— 88,  Wall  Stock  Rack,  371 
— 89,  Tire  Rack,  371 
— 90,  Revolving  Rack,  371 
— 91,  Perpetual  Inventory  Form,  378 
— 92,  Perpetual  Inventory  Form,  380 
— 93,  Perpetual  Inventory  Form,  381 
— 94,  Past  Consumption  Record,  383 
— 95,  Perpetual  Inventory  Form,  385 
— 96,  Inventory  Sheet,  389 
— 97,    Card   Form    of   Perpetual   In- 
ventory,  391 
— 98,    Record    of    Receipt    of    Ma- 
terials, 397 

— 99,     Record    of    Receipt    of    Ma- 
terials,  398 
— 100,  Report  of  Chemical  Test,  401 
— 101,  Credit  Requisition,  406 
— 102,   Report  of  Receipt   of  Scrap 
Material,  408 

— 103,  Material  Requisition,  413  "^ 
— 104,  Stock  Order,  414 
— 105,  Shortage  Form,  415 


— 106.  Shop  Order  and  Stores  Requi- 
sition, 419 
Figures  and  Charts,   214 
Financial  Department,  334 
Finance,  Relation  of  Buyer  to.  162 
Filing  of  Catalogues,  209 
Finished  Material,  402 
FoUow-up  Clerk,  195 

— Orders,  267 

— Work,   123 
Fonn  for  Following  up  Orders.  274 

— for  Recording  Invoices,   282 

— for   Recording  Prices,  69 

— for  Reporting  Progress  of  Orderg. 
125 

— for  Tabulating  Quotations.  247 

— ^Letter    for    Following    up     Ship- 
ments, 275 

— of   Contract,    106 

— of  Requisitions,  411 

— of  Wealth,  314 

— Order,    109 

— Order,  with  Acknowledgment  Slip. 
110 

— Contract,  104,  106 
Forms,  Contract,  Remedial,  113 
Freight  Allowance,   311 

— Charges,  Checking  of,  289 

— on   Defective   Material,    309 
Friendship  in  Business,   184 
Functions     of     Assistant     Purchasinf 
Agent,   193 

— of  Purchasing  Agent,  191 

Goods,  Acceptance  of,   304 
— Receipt  for,  310 
— Received,   Record  of,   396 
— Returned,   Credit  for,  300 

Grade,  Definition  of,  95 

Guaranties,  Price,  86 

Helps  in  Getting  Deliveries,   127 

Ideal  Inventorying,  384 

Identifying  Material,  404 

Incommg    Documents,    Disposition    of, 

226 
Influence   of  Charts  on  Buying.  223 
Information,  Accumulating  and  Record- 
ing of,  227 

— Clerk.  196 

— Compound,  220 
Importance  of  Delivery  Date,   119 
Improper  Descriptions,  24 
Index  Card,  Catalogue,  211 

— for  Specifications,   17 
Inspecting  Material,  310 

— Methods,  399 
Inspection,  128 


— ^Before  Shipment,   128 
— Value  of,  398 
Inspector's  Report  Form,   126 
Instruction  Sheet,  263 
Intended  Use  of  Articles,  38 
Intensive  Storing,  373 
Inventory  Form,   Perpetual,   378,   380, 
381,  385,   391 

— Perpetual,    377 

— Physical,  383 

— Posting  Values  on  Stores,  388 

— Price,  327 

— Sheet,  389 
Inventorying,  Ideal,  384 
Invoice  Clerk,   195 

— ^Debit,  295 

— ^Payments,    141 

— Payments,  Dates  for,  140 

— Record,  282 
Invoices,  147,  278 

— and   Cash  Discounts,   154 

— Checking  of,  283 

— ^Date  of,  313 

— ^Lost,  312 

— Method  of  Recording,  280 

— Relation  to  Purchasing,  137 

— Standardization  of,    136 

— ^Terms  on,  311 

— ^Work  to  be  done  on,  135 
Is«aance  of  Orders,  Cost  of,  18o 
Issuing  Stores  in  Sets  or  Groups,  417 

Jobbers,  56 

Knowledge  of  Prices,  68 

Leeway   in   Manufacturing    Quantities, 

301 
Letter,  Form., on  Shipments,  275 
Liability  of  Railroad  Company,  309 
Limits,  Storage,  329 
List,   Price.   Standard,    150,   151,    152, 

153 
Lists,  Price,  300 
Locating' of  Materials.  404 

— the    Storeroom.    337 
Losses,  Departmental,  51 

— through   Incorrect  Definitions,   50 
Lost  Invoices.  3ria 
Lumber,  Stacking  of  Finished,  355 

Machine.  Counting  in  Storeroom,  339 
Machines,  Counting,  347 

— Counting  and  Weighing,   349 
Maintenance  of  Prices,  87 

—of  Stock.  330 
Management   and   Administration,   lo» 
Manipulated  Prices,  76 


Manufacturing  Quantities,  Leeway  in, 

301 
Manual     Operations     and     Equipment, 

336 
Market,  The.  52 
— Value.  327 
Markets,  Creating,  53 
Material  Consumed.  Record  of,  231 
— Finished.   402 
— Inspecting,  310 
— Received  into  Stores,  402 
— Receiving.    394 
— Record  of  Recepit  of.  286 
— Requisition.    240.    413 
— Returned  to  Stores,  405 
— Specifications,   15 
— Storage  of,  403 
— Truckine.    3.';2 
Materials,    Locatine    and    Identifying, 
404 
— Record  of  Receipt  of,  397 
Maximum  and  Minimum   Storage  Lim- 
its, 329 
Meetings,  Departmental,  176 
Memorandum.  Debit,  294 
Metal  Bins.  362 
Methods,  Buying.  81,  82 
— Counting.  342 
— Inspecting,   399 
— of    Testing,    Need   of   Recognized, 

129 
— ^Purchasing,  3 
— ^Weiehinsr.   350 
Mistakes  in  Contracts.   305 
Moving  of  Bed  Frames  in   Storeroom, 
353 

Negotiations.  Preliminary,  92 
Net  Cost,  Meaning  of,   145 
Non-Specification    of    Delivery    Point, 

307 
Notice  of  Acceptance,  138 

ObUgatlon  of  Buyer,  149 

— of  Transportation  Companies,   308 
Offer  and  Bid.  Distinction  between,  92 
Offers  by  Telegraph.   305 
Open-Air  Storage,  372 
Open-Shelving,  366 
Operations,  Manual,  336 
Order  Clerk.  194 

— Form,   109,  261 

— Form,  Terms  on,  310 

Form  with  Acknowledgment   Slip, 

110,  258 

— Form  with  Conditions,  260 

— Record,  Purchase,  35,  266 

— Request  for  Price  on,  265 

— Sheet,  Reverse  of,  271 


432 


INDEX 


INDEX 


433 


— Stock,    414 
Orders,  256 

— Acknowledgment  of,  257 

— and  Contracts,  103 

— Cost  of  Issuing,   180 

— Covering,  for  Recording  Purposes. 

113 
— Emergency.  126 
— Follow-up,   267 
— Following  up  of,  274 
— Form   for   Reporting  Progress   of, 

125 
— Pick-up,  111 
— Purchase,  Record  of,  264 
— Regular,   107 
— Rush,  108 

— Shop,     and     Stores     Requisitions, 
418.  419 

— to   Agents,  300 

— Verbal.  91 

— Without  Prices,  303 

— Writing  Up  of,  259 
Organization   Chart  of  Purchasing  De- 
partment. 192 

— of  Purchasing  Department,   190 
Overhead  Belt  Conveyor,  361 
Over-Systematization,  55 
Ownership  Transfer,   121 

Packing  Charges,  306 
P*rt  Number  Standard  Method  of  In- 
dicating, 27 

— Payment,   Settlement  by,  312 

— Shipments,   306 
Parts,  Counting  Brass  Bed,  341 

— Counting  of  Small,   345 
Past  Consumption  Record,  383 
Patterns  and  Dies,  298 
Payment,  Part,  Settlement  by,  312 

— Terms  of,   311 

— Time  of,  312 
Payments,  313 

— Invoice,  140 
Penalty  Clause,  304 
Performance,  Price  Based  on,  85 
Period,  Credit,  312 

— Trial,  302 
Periodic  Inventories,  Perpetual  versus, 

376 
Perpetual  Inventory,  377 

— Inventory   Forms,    378,    380,    381, 
385,  391 

— versus    Periodic    Inventories,    376 
Physical  Inventory,   383 

— Test,  Report  of,  401 
Pick-up  Orders,   111 
Place  of  Delivery,  96 
Planning  and  Locating  the  Storeroom, 
337 


Policy  of  Purchasing  Agent.  167 
Porcelain  Knobs,  Counting  of,  341 
Posting    Values    on    Stores    Inventory, 

:i88 
Practical    Experience    for    Employees, 

181 
Preliminary  Negotiations,  92 
Pressure,  Executive,  184 
Price  and  Demand,  71 

— Authority,  75 

— ^Based  on  Performance,  85 

— Clerk,    194 

— Guarantees,    86 

— Inventory,   327 

— Knowledge,  68 

— Maintenance,  87 

— Record,  148,  232 

— ^List,  Standard,  150,  151,  152,  153 

— ^Lists,  300 

— versus    Value,    64 
Prices  and  Exports,  74 

— Arrangement  of,   88 

— Chart  of  Steel,  217 

— Checking  of,  288 

— Competitive,   77 

— Manipulated,   76 

— Orders  Without,  303 

— Recording  of,  69 

— Spot  and  Option,  on  Cotton,  217 

— Resale  84 

— Strategy  in  Arranging,  79 

— Trade,  73 
Pricing  Requisitions,  244 
Problems,  Counting,   338 
,  — Delivery,  267,  410 

— Stores,  318 

— Transportation,   131 
Procurins  of  Catalogues,  208 
Production  and  Delivery  Costs,  119 

— Storage  Space  and,   328 
Profits  in  Storage,  320 
Progress  Report,  276 
Prompt  Shipment,  308 
Proportional  Scales,  346 
Psychological  Factors  in  Storage,    324 
Psychology  in  Purchasing,  1^4 
Purchase  Order  Record,  35,  261,  364 

— Terms  of,  98 

Purchasing  Agent,  Assistant.  Functions 
of,   193 

— Authority  of,  168,  299 

— Field  of  the,  171 

— Functions  of,   191 

— Policy  of,   167 

— Qualifications  of,    157 

— Responsibility  of,    157 

— Stores  Requisitions  on,  425 
Purchasing,  Books  on,   199 

— Cycle,  Completion  of,  134 


— ^Definition  of,  1 

— ^Divisions,  Corelation  of,  11 

— ^Divisions  of,  8,  9 

— ^Economics  of,  2 

— Ethical  Standards  of,  182 

— Methods,   3 

— Psychology  in,   164 

— Relation  of  Invoices  to,  137 

— Science  of,  2 
Purchasing  Department,  4 

— Arrangement  of,   196 

— Organization  Chart,  192 

— Organization  of,    190 

— Origin  and  Mission  of,  173 

— Outline  of  Work,  189 

— Relation  of,   175 

— Relation  to  Sellers,  178 
Purpose  of  Definitions,  28 

Qualifications     of     Purchasing     Agent. 

157 
Quality,  301 

— Definition  of,  95 
Quantities,   Leeway  in  Manufacturing, 

301 
Quantity  Purchased,  41 
Quotation,  Request  for,  245,  246 
Quotations,  Daily,  70 

— Form  for  Tabulating,  247 

Rack     Construction,     Steel     Sectional, 
370 
— Revolving,   371 
— Tire   Storage,    371 
— Wall  Stock,  371 
Backs,  368 

— Stock,  370 
Railroads,  Liability  of,  309 
Recapitulation,  63 
Receipt  for  Goods,  310 

— of  Material,  Record  of,  286,  397, 
399 
Received  Goods,  Record  of,   396 
Receiving  Material  at  Factory,  394 

— Material  into  Stores,  402 
Reciprocal  Agreements,   183 
Record  of  Invoices,  282 

— of  Material  Consumed,  231 

— of  Past  Consumption,  383 

— of  Purchase  Orders,  264,  266 

— of  Receipt  of  Material,  286,  397, 

399 
— of    Salesmen,    179 
— of  Shipments,  255 
— of  Sources  of  Supply,  229 
— of  Stores,  421 

of   Time   Required   for   Shipment, 

121 
—Price,   148,  232 


— ^Purchase  Order,   35 

— Stockkeeper's,    Definitions   on,   36 
Recording  of  Information,  227 

— of  Invoices,  280 
Records,  Compiling,  177 

— of   Goods  Received,   396 

— of  Sources  of  Supply,  58,  59 
Reducing   Selling  Costs,  47,   164 
Registers  and  Agencies,  201 
Regular  Orders,  107 
Request  for  Price  on  Order  Issued,  265 

— for  Quotation,  245,  246 
Relation    of    Invoices    to    Purchasing, 
137 

— of   Purchasing  Dept.    to   Business, 

175 

— of      Purchasing      Department      to 
Sellers,   178 
Relations   between    Buyer    and    Seller, 

43 
Remedial  Contract  Forms,  113 
Report  Form,  Inspectors,  126 

— of   Chemical   or   Physical  Test  on 

Materials,   401 
— of  Receipt  of  Scrap  Material,  408 
— on  Progress,  276 
Requisition  Clerk,  194 
— Confirmatory,   242 
— Credit,   406 
—Form,  230,  241,  411 
— Material,  240,  413 
— Routing  the,  243 
— Stores,  on  Purchasing  Agent,   425 
— Rush,  235 
— Samples  of,  238 
— Stores,  and  Shop  Orders,  418,  419 
Requisitions,  233 

— Pricing  of,  244 
Resale  Prices,  §4 

Responsibility    of    Purchasing    Agent, 
157 
— of  Salesmen,  299 
Return  of  Containers,  301 
Returned  Goods,   Credit  for,  309 

— Material,   405 
Reverse  of  Order  Sheet,  271 
Revolving  Rack,  371 
Roller  Conveyors,  359 
Rollway,  Scales  and  Chutes,  Combin»- 

tion  of,  361 
Routing  the  Requisition,  243 
Rush  Orders,   108 
— Requisitions,  235 

Safe  and  Sane  Storage,  321 
Salesmanship,    Reducing   Cost   of,    164 
Salesmen,  Record  of,  179 

— Responsibility  of,  299 
Samples,  40 


i 


i 


434 


INDEX 


— of  Requisitions,  238 

— Testing  of,    129 
Scale  Elevating  Truck,    355 

— Even  Balance,   344 
Scales,  Proportional,  346 
Scarcity  of  Commodities,    332 
Schedule,  Buying  on,   120 
Science   of  Purchasing,   2 
Scrap,   406 

—Material,    Report    of    Rceeipt    of, 
408 
Sectional  Rack   Construction,    370 

— Steel  Bins  and  Shelving,  362 
Securing  Cash  Discounts,  291 

— Credits,    292 
Sellers,    Segregation  of,  48 
SeUing  Costs,  Reducing,  4 

— Expense   and   the  Buyer,   45 
Settlement  by  Part  Payment,  312 
Sets,    Issuance    of   Stores   in,    417 
Sheet,  Instruction,  263 

— Inventory,    389 
Sheets,    Counting   of,    345 
Shelving,  Open,  366 

— Construction   of,    367 
Shipment,  Inspection  Prior  to,   128 

— Record  of  Time  Required  for,  121 
Shipments,   Following  Up,  275 

— Part,  306 

— Prompt,  308 

— Record  of,   255 

Shop   Orders   and   Stores   Requisitions. 

418,    419 
Shortage  Form,  415 
Shortages,  412 

Six  Divisions  of  Purchasing,   8 
Small  Parts,  Counting  of,  345 
Solvency  of  Vendors,  301 
Sources  of  Supply.  57 
Space,  Storage,  328 
Specifications  and  Definitions,   14 
Specifications,   Coal,   18 

— Equipment,    17 

— Index  Card  for,  17 

— Material,  15 
Spot  and  Option  Prices  of  Cotton,  217 
Stacking  of  Finished  Lumber,   355 
Standard  Descriptions  and  Definitions, 
19,   20,   21,   22,   23,   24,   25 

— Dimensions,  Tabulation  of,   32 

— Method   of   Indicating   Part   Num- 
ber, 27 

—Price  List,   150,   151,   152,   153 
Standardization  of  Catalogues,  206 

— of  Supplies,    174,   324 
Standardizing  Invoicing,    136 
Standards,  Ethical  Purchasing,   182- 
Statements,  False,  305 
Stationery  Stores,  407 


Steel    Bins    and    Shelving,    Sectional, 
362 

— Sectional  Rack   Construction,    370 
Stockkeeper's   Record,    Definitions    on, 

36 
Stock  Maintenance,   330 

— Order,   414 

— Rack,    Wall,    371 

— Racks,  370 
Storage,  Cost  of,  315 

— Limits,    Maximum    and    Minimum. 
329 

— Open  Air,  372 

— Problem,  Extremes  of  th»,   323 

— Profits   in,   320 

— Rack,  Tire,  371 

— Safe  and  Sane,  321 

— Spate  and  Production,  JJ28 
Storeroom.   Clerical  Work  in,    337 

— Counting  by  Machinery  in,  339 

— ^Counting  Parts  in,   339 

— Location  of  the,   337 

— Moving  Bed  Frames  in,  353 
Stores   Department,    334 

— Issuance  of,  417 

— Problem,   318 

— Receiving  Material  into.   402 

— ^Record,   421 

— Requisitions  on  Purchasing  Agent. 
425 

— Stationery,   407 

— Sup))lies  from,  420 
Storing,    Intensive,   373 

— Material,  403 
Stategy  in  Arranging  Prices,  79 
Supplies  from  Stores,  420 

— Standardization    of,    174.    324 
Supply  Record  of  Sources  of,   58,   59, 
229 

— Sources   of,    57 
System,    Standard  Catalogue,   210 

Telegraph  Offers,  305 
Terms  of   Payment,  311 

— of  Purchase,  98 

— on  Invoices,  311 

— on  order  Form,  310 
Test    Report,     Chemical    or    Physical, 

401 
Testing  Methods,  Need  of  Recognized, 
129 

— of  Samples,    129 
Three   Curve   Chart   of  Cotton  Waste, 
Time,  Delivery  Prior  to  Contract,  307 

— of  Delivery,  96 

— of   Payment,    312 

— Required   for    Shipment,    121 
Tire   Storage  Rack,   371 
Trade  Acceptance,  137 


INDEX 


435 


— Cycles  and  Prices,  73 
Traffic  Clerk,  195 

— Work,    122 
Transfer  of  Ownership,  121 
Transportation       Companies,       Claims 
Against,  309 

— Obligation,  308 

— Problems,   131 
Trial  Period,  302 
Truck,  Elevating,   355 
Trucking  Material,  352 

Universal  Standard  Catalogue  System. 

210 
Use  of  Articles,  Intended,  38 

Value,  Market,  327 


Value  of  Charts  to  Buyer,  216 

— of  Inspection,    398 

— versus  Price,   64 
Values,  Factors  which  Reduce,  317 

on   Stores   Inventory,    Posting   of, 

388 
Variations  in  Routine  Work,  264 
Vendors,   Solvency   of,  301 
Verhal  Orders,   91 

Wall  Stock  Rack,  371 
Waste,  Cotton,  221 
Wealth,  Forms  of,  314 
Weighing  and  Estimating,  343 

— Machines,  349 

— Methods,  350 
Writing  Up  Orders,  259 
Written  Contracts,  91 


1 


! 


Date  Due 


SIP  2  9 


Nov18'52 


r«b5  54 


195.0  ,0 


'-h 


NEH 


X)0-S\ 


T9'i'3 


fOR  0 


COLUMBIA 


0041426215 


